Preamble

The House met at a Quarter before Three of the Clock, Mr. SPEAKER in the Chair.

PRIVATE BUSINESS.

Ministry of Health Provisional Order (Shipley) Bill.

Read a Second time, and committed.

Oral Answers to Questions — LEAGUE OF NATIONS.

MANCHURIA.

Mr. MANDER: 1.
asked the Secretary of State for Foreign Affairs if he will give particulars of the communication sent by the Chinese delegation to the League of Nations to the Manchukuo Committee of the League with reference to its non-recognition of Manchukuo and the new Manchurian Empire?

The SECRETARY of STATE for FOREIGN AFFAIRS (Sir John Simon): The hon. Member presumably refers to the communication made on the 19th March to the Secretary-General of the League of Nations from the Permanent Office of the Chinese delegate accredited to the League. This communication contained the text of a statement made by Mr. Wang Ching-Wei, Chinese Minister for Foreign Affairs, on the occasion of the enthronement of Mr. Pu Yi in Manchuria. As the statement is somewhat long, I propose to have it printed in the OFFICIAL REPORT.

Mr. MANDER: Would it be true to say that it amounts to complete repudiation on behalf of China of all Japanese action in Manchuria?

Sir J. SIMON: I never believe in giving by word of mouth the contents of a document which will shortly be available.

Following is the statement:

The assumption of imperial title by Pu Yi, another act of high treason against
the Chinese Republic, has long been heralded and is arousing nation-wide indignation in this country.

However, as we look at the situation, the status of the Three Eastern Provinces and Jehol is no other than that of illegal military occupation, while Pu Yi and other members of his theatrical troupe are mere puppets controlled by their masters and have no independent personality. Whether Pu Yi's name be "chief executive" or "emperor" or whether his illegal regime be "the republican" or "monarchial" does not affect in the least the inherent nature of the puppet, the changes being mere shifts in the role the puppet plays. Looking from this angle one need not be greatly surprised at all the farcical comedy that is being enacted in Changchun.

China's attitude towards the puppet's regime has always been the same and shall remain so, notwithstanding any change in the appearance of the puppet. The same may be said of European and American Powers with whom the principle of non-recognition of "Manchukuo" has become an ironclad law of international morality, and deviation from, or violation of, which will surely reflect on the international personality of the State concerned.

By this latest act in Changchun the gravity of the Far Eastern problem will undoubtedly be further heightened, while international rivalries and complications in the Far East will be further increased, all pointing to one condition, namely increasing insecurity in world peace. This is most deplorable, but the world will know where the responsibility lies.

REGISTRATION OF TREATIES (UNITED STATES).

Mr. MANDER: 2.
asked the Secretary of State for Foreign Affairs if he will give particulars of the arrangement concluded by the United States of America with the secretariat of the League of Nations for the registration of treaties and other international agreements to which the United States of America becomes a party; and what treaties have already been registered by the United States under this arrangement?

Sir J. SIMON: The State Department of the United States announced on the 29th January last that it was proposed to take advantage of the privilege of
voluntary registration accorded, in a memorandum approved by the Council of the League on the 19th May, 1920, to countries which are not members of the League of Nations. Up to the end of February no treaties had been registered by the United States. The list of treaties registered with the League of Nations for the month of March has not yet been received.

Mr. CHARLES WILLIAMS: Will the United States be able to make a voluntary subscription to the League of Nations funds?

Sir J. SIMON: That is a privilege of members.

Mr. MANDER: Is it not a fact that the United States have paid their full and proper subscriptions to the expenses of the Disarmament and other Conferences?

SAAR TERRITORY.

Sir CHARLES CAYZER: 7.
asked the Secretary of State for Foreign Affairs whether his attention has been called to the speech made recently by Herr Anton Scherer, a deputy leader of the Nazi party, at Dillingen, Saar, to the effect that after the plebiscite in 1935 the Nazi party will take exemplary vengeance for 24 hours throughout the Saar territory; and whether he proposes to enquire further into the matter?

Sir J. SIMON: I should be glad if my hon. Friend would supply me with the report on which this question is based, which I have not been able to trace. I will then consider the matter, but I must point out that this class of question is entirely within the competence of the Saar Governing Commission to deal with.

Mr. MANDER: But is not the Saar Commission under the control of the League of Nations, and are we not therefore to some extent responsible?

Sir J. SIMON: Neither is the League of Nations responsible for questions directed to His Majesty's Government.

Mr. MANDER: Are not His Majesty's Government represented on the Council of the Leagued

Sir J. SIMON: The hon. Member can surely appreciate the distinction between
a question inviting His Majesty's Government as such to take particular action, and a question whether the League of Nations should take action.

Sir C. CAYZER: In view of this country's responsibility for the administration of the Saar territory as members of the League, will my right hon. Friend bear in mind the character of the statement in that speech when the question of the future regime of the Saar comes up for consideration next year?

Sir J. SIMON: I would remind my hon. Friend that I invited him in my original answer to supply me with his source of information.

PRIVATE MANUFACTURE OF ARMS (REPORT).

Mr. DENVILLE: 4.
asked the Secretary of State for Foreign Affairs if he has read the charges made in evidence before the Committee of the Second Assembly of the League of Nations declaring that bribery had been offered to Government officials both at home and abroad; and if he will ask the League to publish the names of the firm and of the officials?

Sir J. SIMON: My hon. Friend is referring to a report made at Geneva 13 years ago and on examining it I can find no reference to evidence having been given. My hon. Friend's question seems to be based on a widespread misapprehension, and I should like to make plain to the House the source of the error. In a green-covered pamphlet entitled "The Secret International Armament Firms at Work," and extensively circulated in this country and abroad, there appears on page 5 the statement that in 1921 a League of Nations Commission which had been appointed to inquire into the problem of the private manufacture of arms, came to six conclusions in condemnation of the system and the second conclusion is the one quoted in my hon. Friend's question. In point of fact the League of Nations Commission came to no such conclusions, but on the contrary produced a report—I have it here—in which they set out a series of general considerations both pro and con on the subject and in view of the difficulty of arriving at recommendations in the face of these contrasting considerations concluded that it was unable
to reach a final conclusion upon the difficult and complicated topic submitted to its consideration. It cannot at the present
stage of its deliberations either recommend the abolition of private manufacture or advise upon the particular steps to be taken to control it, should it be decided that on the balance of advantage private manufacture must be allowed to continue".
It is greatly to be regretted that in the pamphlet to which I have referred the League of Nations Commission's report should not only be misrepresented in that considerations are set out on the one side as though they were conclusions, but that it should have suppressed all reference to considerations on the other side and the plain statement of the League of Nations Commission that in these circumstances they did not recommend abolition. I am obliged to my hon. Friend for putting his question and hope that this answer will secure that no further circulation is given to such misstatements.

Mr. DENVILLE: Is the Foreign Secretary aware that this question was put down with the object of clearing up something which has been a source of annoyance for a considerable time? I consider his answer most satisfactory.

Oral Answers to Questions — SPAIN (BRITISH SUBJECT'S ARREST).

Mr. LYONS: 3.
asked the Secretary of State for Foreign Affairs whether he is aware of the fact that a British youth named Richard Havelock Clark, aged 17, has been arrested in Madrid, and will he state the charge, the dates of arrest and preferment of charge, respectively; what is the type of imprisonment that he has suffered, and for how long it included solitary confinement; and whether any proceedings have yet commenced?

Sir J. SIMON: I made a statement about this case in the course of Debate on the 14th March. I have since learned that Mr. Clark, who was arrested on the 6th February, was brought before a military tribunal sitting in camera on the 20th February on suspicion of complicity in espionage. The tribunal has not yet, I understand, reached its decision. Mr. Clark was in solitary confinement for three days after his arrest. A formal application for Mr. Clark's release on bail was lodged on the 9th April, and a decision on this application has been promised for this week.

Oral Answers to Questions — CHILE (BRITISH INVESTORS).

Sir C. CAYZER: 5.
asked the Secretary of State for Foreign Affairs whether he is aware that Chile continues in complete default on her obligation to British investors in her foreign loans; and will he state what progress has thus far been made by the Chilean Government towards resumption in whole or in part of the service of pre-War loans floated in London?

Sir J. SIMON: Yes, Sir. My information is that so far no progress has been made 'by the Chilean Government towards the resumption of the service of these loans. I would add, however, that the financial traditions of Chile are such as to justify the hope that payment will be resumed as soon as the improvement of the fiscal resources and the availability of international exchange permit of this being done.

Oral Answers to Questions — YUGOSLAVIA.

Vice-Admiral TAYLOR: 6.
asked the Secretary of State for Foreign Affairs if he will state what is the latest information which His Majesty's Government has as to the payment of compensation to dispossessed landowners under the Yugoslavian Agrarian Reform Decree of February, 1919?

Sir J. SIMON: I have no recent information regarding this matter.

Vice-Admiral TAYLOR: Is my right hon. Friend aware that no payment has been made since 1929, and can he make inquiries as to why compensation has not been paid?

Sir J. SIMON: So far as I am aware no one who was a British subject at the relevant date is a claimant. Consequently, the Government are not in a position to make representations on behalf of claimants.

Vice-Admiral TAYLOR: Have we no obligations under the Treaty to see that it is carried out?

Oral Answers to Questions — RUSSIA (BROADCAST PROPAGANDA).

Captain CUNNINGHAM-REID: 8.
asked the Secretary of State for Foreign Affairs if his attention has been called to the anti-God broadcast in English on Easter Sunday from the Soviet wireless
station at Noginsk; and if, seeing that this constitutes a breach of the Lucerne agreement on broadcasting, he will make representations to the Soviet Ambassador in this country?

Sir J. SIMON: The International Broadcasting Convention signed at Lucerne last year contains no clause which could be said to be contravened by the speech mentioned by my hon. and gallant Friend. The Convention, I understand, deals solely with wave-lengths.

Oral Answers to Questions — MANCHURIA (POSTAL MAILS).

Mr. BURNETT: 11.
asked the Secretary of State for the Colonies whether the Government of Hong Kong accept and deliver mails from Manchukuo; and, if so, what arrangement has been made with the Manchukuo administration as to the recognition of its authority to act in respect of postal communications?

The Secretary of STATE for the COLONIES (Sir Philip Cunliffe-Lister): The reply to the first part of the question is, I understand, in the affirmative. I am not aware of the details of the arrangements.

Oral Answers to Questions — KENYA.

ARABS, MOMBASA.

Sir ROBERT HAMILTON: 12.
asked the Secretary of State for the Colonies whether a reply has now been sent to the petition addressed to him by the Arab community in Mombasa?

Sir P. CUNLIFFE-LISTER: During my recent visit to Kenya I took an opportunity of discussing the petition with Sheriff Abdulla bin Salim, the Arab elected member of council. I undertook to examine the petition fully on my return, and I have now done so. I am sending the hon. Member a copy of my despatch in reply.

SQUATTERS.

Sir R- HAMILTON: 13.
asked the Secretary of State for the Colonies if he has any information as to the intention to introduce a new squatter ordinance into Kenya Colony; and whether a copy of the draft ordinance can be placed in the Library of the House?

Sir P. CUNLIFFE-LISTER: I would refer my hon. Friend to the reply given on the 28th of March to a question by the hon. Member for Wednesbury (Mr. Banfield), of which I am sending him a copy.

PROSPECTING LICENCES.

Mr. LUNN (for Mr. DAVID GRENFELL): 14.
asked the Secretary of State for the Colonies the number of licences for prospecting that have been granted at Kakamega; and whether any other persons than British citizens have been given licences?

Sir P. CUNLIFFE-LISTER: Twelve exclusive prospecting licences have been issued in the Kakamega field, of which 11 are held by British subjects or companies and one by two Belgians. An ordinary prospecting right, as distinguished from an exclusive prospecting licence, is not limited to any particular area. Prospecting in the North Kavirondo native reserve, however, is restricted to the holders of a special permit to enter the reserve. Four hundred and twenty-nine such permits are at present in force, of which 374 are held by British subjects, 32 by foreigners, 22 by Indians, and one by an Arab.

Mr. LUNN (for Mr. D. GRENFELL): 15.
asked the Secretary of State for the Colonies whether he will state the extent to which Kenya native lands have been allocated to prospectors at Kakamega; and whether there are any native prospectors to whom claims have been leased?

Sir P. CUNLIFFE-LISTER: The valid mining locations registered in respect of the Kakamega field cover about 65,000 acres; which area is gradually being reduced as the locations are tested. Claims were registered by two natives, but are understood to have been abandoned. No leases have yet been granted to anyone whether native or non-native.

MURDER CHARGE, NAIROBI.

Mr. MORGAN JONES: 19.
asked the Secretary of State for the Colonies if his attention has been called to the sentence of death passed by a Nairobi court, on Odongo, a member of the Kavirondo tribe, for the murder of a white resident; whether he has had the papers relating to the case before him; whether there have been other murder charges where the views of the native assessors were
over-ridden by the presiding judge; and whether he contemplates any alteration of the existing law on the matter?

Sir P. CUNLIFFE-LISTER: Yes, Sir, though I have not received the record of the court proceedings. I am not aware whether there have been other murder charges in Kenya where the finding of the Court has been at variance with the opinions recorded by the assessors, but the court is not bound to conform to such opinions. No alteration of the law is in contemplation. I ought to add that this case was carried on appeal to the East African Court of Appeal and that the appeal was dismissed.

Mr. JONES: Before sentence is carried out in this case, is it necessary for the right hon. Gentleman to give final approval to it; if so, will it be possible for him to ask for the papers to be sent to him personally so that he can look into them himself?

Sir P. CUNLIFFE-LISTER: No; the hon. Gentleman is under a complete misapprehension as to the constitutional course of procedure. The exercise of the prerogative of mercy is the responsibility of the Governor, and not of the Secretary of State.

NIGERIA (TRIAL OF NATIVES).

Mr. MALLALIEU: 16.
asked the Secretary of State for the Colonies what is the number of Natives of Nigeria tried and executed during the three years 1931, 1932 and 1933 without being allowed to employ counsel in their defence?

Sir P. CUNLIFFE-LISTER: The number of persons executed after trial before Provincial and Native Courts during the three years was 170, namely:


In 1931
66


In 1932
70


In 1933
34


Of these the great majority were tried by the Provincial Courts, which have now been superseded by the High Court for the Protectorate before which accused persons can be represented by counsel.

Oral Answers to Questions — SEYCHELLES.

Captain CUNNINGHAM-REID: 17.
asked the Secretary of State for the
Colonies what action he proposes to take on the report of the commissioner appointed by him to inquire into the financial situation of Seychelles?

Sir P. CUNLIFFE-LISTER: I have not yet received from the new Governor of Seychelles, who assumed office only six weeks ago, a full statement of his views on the recommendations of the commissioner. I hope very shortly to receive from him a full report on the situation, together with his proposals for action. Meanwhile he has already initiated a policy of retrenchment in the Colony.

Oral Answers to Questions — ROYAL AIR FORCE.

AIR COUNCIL (SERVICE MEMBERS).

Mr. WHITESIDE: 20.
asked the Undersecretary of State for Air if he will state the average number of hours flown by service members of the Air Council during 1933 either as pilots or passengers in military machines?

The UNDER-SECRETARY of STATE for AIR (Sir Philip Sassoon): No separate record is kept of the number of hours flown by the service members of the Air Council from year to year, which naturally varies with the location and nature of the inspection and other duties to be carried out. For example, the chief of the Air Staff is at the present time carrying out a long tour of inspection by air in the Middle East.

Mr. WHITESIDE: Can my right hon. Friend assure the House that Service members of the Air Council have full practical experience of the performances of modern machines?

Sir P. SASSOON: They keep themselves in flying training.

EMPIRE AIR-DAT.

Mr. MANDER: 21.
asked the Undersecretary of State for Air if he will give particulars of the Empire air-day arranged by the Empire Air League at various Royal Air Force stations on 24th May?

Sir P. SASSOON: Arrangements are being made to open about 40 Royal Air Force stations from 2 p.m. to 7 p.m. on 24th May, to enable members of the public, on payment of a small charge for
admission (the proceeds of which will be devoted to Service charities), to inspect hangars, workshops and aircraft at close quarters and to obtain an insight into the everyday life of the Royal Air Force. Visitors will have an opportunity of seeing almost every phase of the peace-time work of the Royal Air Force, and I hope that the public will take full advantage of this innovation, which is due to the initiative of the Air League of the British Empire. No expenditure from public funds will be involved.

Mr. MANDER: Do the Government feel that not sufficient public interest is being taken in the Royal Air Force?

Sir P. SASSOON: It is because so much interest is being taken by the public that they would like an opportunity of seeing a little more of the Royal Air Force training at close quarters.

Sir WILLIAM WAYLAND: Is it not a fact that civil aviation grounds will be open, the object being to interest people, young and old, in the flying facilities at present available in this country and throughout the world for linking the Empire more closely?

Oral Answers to Questions — AVIATION.

SOLO FLIGHTS (JUVENILES).

Mr. LYONS: 22.
asked the Undersecretary of State for Air the number of children who, under the age of 16, have made solo flights in British aerodromes during the last six months or nearest convenient date; and what is the lowest age at which any such flight has been recorded?

Sir P. SASSOON: I regret that the information for which my hon. Friend asks is not on record in my Department. I am advised, however, that the aero clubs discourage solo flying by children, and I understand that instances of solo flights of the kind referred to in the question are very rare. The Air Ministry has informed both the Abridge Aerodrome authorities and the association which issues certificates to flying instructors that it is undesirable to allow solo flying by boys or girls until shortly before they reach the age of 17, at which age they can obtain a private pilot's licence. Whether any further steps should
be taken in the matter is under consideration.

FLYING REGULATIONS.

Captain HAROLD BALFOUR: 23.
asked the Under-Secretary of State for Air if he will take steps to ensure that all regulations and provisions prohibiting dangerous flying and certain other forms of aerial exhibition are complied with by air circuses now touring England and Scotland?

Sir P. SASSOON: The attention of all pilots and aircraft owners has been repeatedly drawn to the regulations in question by notices to airmen, and I do not think that there is any further action which could usefully be taken by the Air Ministry at this juncture. The securing of compliance with the regulations, by means of legal proceedings in the event of any breach, is, of course, primarily a matter for the police.

PYLONS.

Captain BALFOUR: 24.
asked the Under-Secretary of State for Air whether he can now make any further statement regarding the progress of experiments being carried on by the Air Ministry and the Electricity Commissioners for the purpose of determining the most effective and practical method of eliminating the danger to flyers from unilluminated pylons?

Sir P. SASSOON: The experiments and investigations are still proceeding, but I regret that I am not in a position to give my hon. and gallant Friend any further information beyond that contained in my reply to him of the 1st February and in my subsequent letter explaining the difficulties of the problem.

Captain BALFOUR: In view of the fact that this danger is ever increasing, as the number of pylons becomes greater, will my right hon. Friend be able to give me some more definite information if I put down a question in a month's time?

Sir P. SASSOON: I shall be very glad if my hon. and gallant Friend will put down a question.

Oral Answers to Questions — ELECTRICITY SUPPLIES.

Mr. LEONARD: 25.
asked the Minister of Transport whether the Electricity Board in its selection of stations for the supply of electricity exercises any prefer-
ence for British companies; and whether he can state to what extent companies being selected stations are financed by foreign capital?

The MINISTER of TRANSPORT (Mr. Oliver Stanley): All the selected stations under schemes adopted by the Central Electricity Board are owned either by public authorities or by British companies. I am unable to state to what extent the share capital of such companies is held by persons who are not domiciled in Great Britain or who are of foreign nationality.

Mr. GEORGE HALL: 28.
asked the Minister of Transport the number of miles of main transmission lines now in operation and the output of electricity in Great Britain in each year since the Electricity (Supply) Act was passed?

Mr. STANLEY: As the answer contains a number of figures, I will, with the hon. Member's permission, circulate it in the OFFICIAL REPORT.

Following is the answer:

The transmission system of the Central Electricity Board, to which the hon. Member presumably refers, consists of about 4,000 miles of transmission lines of which about 3,000 miles operate at 132,000 volts and the remainder at 66,000 and lower voltages. The greater proportion of the lines are now in actual operation, and I am informed that the whole will be brought into operation during the course of the current year.

The output (units generated) of electricity in Great Britain by authorised undertakers in the years following the passing of the Electricity (Supply) Act, 1926, was as follows:



Units generated. Millions.


1927
8,234


1928
9,073


1929
10,294


1930
10,914


1931
11,413


1932
12,241


1933
13,554

Mr. MAXTON: 30.
asked the Minister of Transport whether he is aware that the North of Scotland Power and Light Company, Limited, supplying electricity for the county of Angus, charges rates both for light and power that are much in excess of those charged in other areas;
and whether he will take steps to bring these charges to a reasonable level?

Mr. STANLEY: I am not aware that the charges made by this company, who are authorised to supply in Brechin and Montrose, are much in excess of those made by companies operating in other areas in Scotland comparable in size and population. In any case, I have no power to determine the prices which may be actually charged by electricity undertakers for the various classes of supply but only to revise the maximum charges on applications made in accordance with the provisions of the Electricity (Supply) Acts.

Mr. MAXTON: Has the time not come for some attempt to standardise on a decent basis these electricity charges throughout the country, and has the Minister not power to use pressure in that direction?

Mr. STANLEY: The first part of the hon. Member's supplementary question raises a wider issue than the question on the Paper. With regard to the second part, I have already answered that I have no power except the power to fix maximum prices if the procedure laid down in the Electricity (Supply) Acts has been complied with.

Mr. MAXTON: Will the Minister consider whether the present maximum prices are not too high?

Mr. STANLEY: Certainly, if the procedure under the Electricity (Supply) Acts is complied with and application comes to me.

Oral Answers to Questions — TRANSPORT.

ROAD ACCIDENTS (EASTER).

Captain Sir WILLIAM BRASS: 26.
asked the Minister of Transport how many fatal accidents took place on the roads over the Easter holidays; how this compared with the same period in 1933; how many motor vehicles were involved; at what speed it was estimated that the vehicles were travelling; whether they occurred in built-up areas, as described in Clause 1 of the Road Traffic Bill; and how the number of vehicles registered this year compares with 1933?

Mr. STANLEY: During the two weeks ended respectively 15th April and 22nd
April, 1933, which included Eastertide, a total of 248 persons were killed or fatally-injured in road accidents. Comparable figures are not available for the two weeks ended respectively 31st March and 7th April, 1934, which include Eastertide, as in many cases death from injuries does not take place until after the close of the week in which the accident occurred. It is, however, known that 187 persons were killed in road accidents during the two weeks in question and as past experience as to the number of injuries which prove fatal after the close of the week in which they occur indicates that at least 60 deaths will be added to the above figure, I regret that fatal road accidents during the two Easter weeks of this year are likely to have been at least as numerous as during the two Easter weeks of last year. I am not in a position to give my hon. and gallant Friend the other information for which he asks.

Sir W. BRASS: Does my hon. Friend realise that simply giving the number of fatal accidents without giving the facts as to where they occur and whether they have been due to speed in built-up areas, is very misleading?

Mr. STANLEY: No, Sir, I do not realise that at all. The more the general public know of the terrible extent of these casualties the more they will exercise caution in their use of the road, whether they be motorists or pedestrians.

Sir W. BRASS: How long would my hon. Friend take to, find out the statistics as to how many people were killed in built-up areas, as the result of high speeds, during the Easter holiday?

Mr. STANLEY: I shall be shortly publishing an analysis for the last six months of last year, which will give information, not of course for the period referred to by my hon. and gallant Friend, but from which we can draw our own conclusions.

Mr. SIMMONDS: Is it not a fact that a large number of accidents are due to the glossy nature of the road surfaces?

Mr. STANLEY: If my hon. Friend will study the analysis of fatal accidents for the first six months of last year, he will see there that in comparison with the total number of fatal accidents, the num-
ber of those due to road surfaces was comparatively small.

PEDESTRIANS' CROSSINGS.

Sir W. BRASS: 27.
asked the Minister of Transport whether he will consider the use of studded paths for pedestrians' crossings, which have been so successful in Paris for many years, in London, instead of the painted ones with crossing signs suggested by his Department?

Mr. STANLEY: For the present experiment, painted markings have been adopted, on the advice of the London Traffic Advisory Committee, as a matter of convenience and economy, but when permanent markings come to be laid down I shall, of course, consider the use of studs as suggested by my hon. and gallant Friend.

Sir W. BRASS: Does not my hon. Friend consider that, if the public are taught to regard the painted paths as pedestrian paths, then, if studded paths are introduced later on, the lesson will have to be re-learned?

Mr. STANLEY: I think the transition would be a matter of comparative ease.

Mr. PIKE: Will my hon. Friend bear in mind that the Sheffield steel industry is completely equipped for the production of these studs?

MENAI BRIDGE (TOLLS).

Sir C. CAYZER: 29.
asked the Minister of Transport what are the total profits, after deducting maintenance charges, from tolls on the Menai Bridge to the latest available date; whether this sum is being set aside as a reserve against the liability of reconstruction at some future date; by what date an adequate reserve will have been established for this purpose; and whether he can give an assurance that the bridge will be freed from tolls after such date in order that it may be made clear that the Ministry of Transport, as a toll-owning authority, does not wish to make unnecessary profits out of its ownership of this toll bridge?

Mr. STANLEY: Menai Bridge was built out of loans advanced by the Exchequer, which have not been repaid. The balance of receipts from tolls over current expenditure in recent years has been carried to a reserve fund, which now amounts to about £95,000, with the object of providing
for the liability of future renewal or reconstruction. While I have been glad to make substantial reductions in certain of the tolls, I regret that I am unable to give any assurance as to the freeing of the bridge from tolls or, in present circumstances, to fix a maximum for the reserve fund.

Sir C. CAYZER: In view of the fact that this bridge is part of the King's highway, and is the only road entrance to the Isle of Anglesea, will the Minister consider the question of making it a national charge and making up the difference by advances out of the Road Fund?

Mr. STANLEY: My hon. Friend will appreciate that hitherto that locality has been in a very favourable position as regards this matter. Whereas other authorities have built bridges with their own money and have incurred loan charges on the rates, the inhabitants of Anglesea have not had to meet these charges, and the sum has been made up by tolls.

Sir ARTHUR MICHAEL SAMUEL: Is the Minister aware that this matter was looked into last year or the year before by the Public Accounts Committee and that there is probably some evidence available which may be of assistance to my hon. Friend the Member for Chester (Sir C. Cayzer)?

Mr. STANLEY: Yes, Sir.

LOWER THAMES TUNNEL.

Rear - Admiral Sir MURRAY SUETER: 31.
asked the Minister of Transport whether with a view to increased efficiency of road transport on the East Coast, especially in the event of war, and with a view to the provision of employment, he will take steps to have work resumed on the Lower Thames Tunnel, as approved by Parliament?

Mr. STANLEY: I understand the local authorities concerned are not prepared to proceed with this costly scheme at present, and I should not feel able, in existing circumstances, to provide the financial assistance originally contemplated. The necessary steps are, however, being taken to safeguard the line of the tunnel and its approaches.

Mr. LOUIS SMITH: Does not the hon. Gentleman realise that in the
national interest it is desirable to improve the transport facilities on the East coast not only with towns South of the Humber but also with the districts across the Humber.

SPEED LIMIT, OXFORD.

Sir W. BRASS: 32.
asked the Minister of Transport the total road mileage included in the 30 miles an hour speed-limit area granted by his Department to the city of Oxford?

Mr. STANLEY: The mileage affected by the City of Oxford Roads (Restriction) Order, 1933, is approximately 16.

Sir CHARLES OMAN: Is the hon. Gentleman aware that almost all the fatal accidents which have taken place in Oxford in the last few years were in the regions covered by the new rule and not in the congested parts?

MOTOR INSURANCE (ACCIDENT, SHREWSBURY).

Mr. DUCKWORTH: 33.
asked the Minister of Transport whether his attention has been drawn to the accident which occurred at Shrewsbury on the 22nd July, 1933, when Harold Norman Harris and Florence Gertrude Fowkes were seriously injured by a motor cyclist, who mounted the pavement and was killed as a result of the accident; whether he is aware that, in the case of the injured persons, no compensation can be obtained through the insurance company owing to the death of the insured person; and whether it is the intention of the Government to introduce legislation in order to deal with cases of hardship and injustice arising in this way?

Mr. STANLEY: My attenton had not previously been drawn to this accident. I am aware that as the law stands at present an action brought by an injured person for damages abates on the death of the person against whom the action is brought and would remind my hon. Friend that this question has recently formed the subject of an interim report issued by the Law Revision Committee. The recommendations made in that report are now receiving the careful attention of His Majesty's Government, and I hope that before the Road Traffic Bill now before the House reaches its final stages, it will be found possible to remedy this defect in the law.

Oral Answers to Questions — TITHE RENT CHARGE.

Mr. TEMPLE MORRIS: 34.
asked the Minister of Agriculture whether he is satisfied that his legislative proposals affecting tithe are fair to Welsh tithe-payers and adequate to deal with the position in Wales?

The PARLIAMENTARY SECRETARY to the BOARD of TRADE (Dr. Burgin): I have been asked to reply. The Government's proposals dealing with tithe rent-charge were decided upon with due regard to all relevant circumstances both in England and Wales.

Oral Answers to Questions — AGRICULTURE.

MILK AND MILK PRODUCTS (IMPORTS).

Mr. WILLIAM MORRISON: 35.
asked the Minister of Agriculture what are the actual restrictions now in force with regard to the importation of foreign skimmed and full-cream condensed milk, sterilised cream, and milk powder?

Dr. BURGIN: The foreign Governments mainly concerned with the export of condensed milk, milk powder and cream to the United Kingdom have been asked by His Majesty's Government to make reductions as follows in such exports as from 1st April, the reductions proposed being in each case based on the imports during the same months of the year previous to the introduction of the voluntary arrangements, namely, June, 1932, to May, 1933:

Condensed skimmed milk.—Reduction of 22½ per cent. for the quarter ending 30th June.

Cream.—Reduction of 30 per cent. for the quarter ending 30th June.

Condensed whole milk and milk powder.—Reduction of 20 per cent. for the time being.

The Government has every hope that these proposals will be agreed to.

Imports of condensed milk, milk powder and cream from foreign countries are also subject to the following Customs duties:

Condensed whole milk and milk powder, unsweetened, 6s. per cwt.; condensed whole milk, sweetened, 5s. per cwt., in addition to any duty payable on the sugar content; condensed skimmed milk and milk
powder, sweetened, 10 per cent. ad valorem, or the duty payable upon the sugar content, whichever is the larger; cream, 10 per cent. ad valorem.

Sir PERCY HARRIS: Has the hon. Gentleman made arrangements with the importers that there should be no increase in the price of any of these commodities, so as to prevent what happened with bacon, which rose in price in consequence of these restrictions? Has he got a guarantee to that effect?

Dr. BURGIN: The question on the Paper deals with the quantity of the restrictions. The other matters, I think, should be the subject of a separate question.

Mr. KIRKWOOD: Does this mean an increase in the price of milk that is being imported, or does it mean a reduction?

Dr. BURGIN: It means neither the one nor the other. It means a continuation of an arrangement that has for some time been in force.

Vice-Admiral TAYLOR: As the imports are still very large in volume, will the Minister not consider, as we are so capable of making these things ourselves, increasing the tariff against foreign imports?

Dr. BURGIN: My hon. and gallant Friend will recollect that some of these matters may be the subject of trade agreements with the countries from which they come, and it would not be possible to disturb a trade agreement shortly after it had been concluded.

Captain HEILGERS: Is my hon. Friend aware that the whole of these commodities could easily be produced at home?

POTATO MARKETING SCHEME.

Captain SHAW: 36.
asked the Minister of Agriculture the number of potato producers in Scotland who voted in favour of the potato marketing scheme; and the acreage which they represented?

Dr. BURGIN: My right hon. Friend regrets that the information asked for is not available. The poll of registered producers on the scheme was conducted over Great Britain as a whole. There was no separate poll for Scotland, and the votes were not recorded by regions.

Oral Answers to Questions — TRADE AND COMMERCE.

SHIPPING INDUSTRY.

Mr. TEMPLE MORRIS: 37.
asked the President of the Board of Trade the numbers of countries which have adopted either regulations or laws making it mandatory that all national goods produced or exported with the help of Government credit should be carried in vessels of the nation in question, unless such were not available; and whether this principle is to be adopted by the British Government?

Dr. BURGIN: A joint resolution to the effect indicated by my hon. Friend has been passed by the Senate and House of Representatives of the United States and approved by the President. I am

The total output of pig iron and steel in the years, 1920, 1930, 1931, 1932 and 1933, respectively, in the United Kingdom, United States of America, Russia, Germany, France, the Saar District and Belgium, was as follows:


In million tons.


—
1929.
1930.
1931.
1932.
1933.(a)


Pig Iron.


United Kingdom
…
…
7.59
6.19
3.77
3.57
4.12


United States of America
…
…
42.61
31.75
18.47
8.78
13.23


Soviet Union (Russia)
…
…
4.28
4.92
4.78
6.07
7.02


Germany
…
…
13.19
9.54
5.97
3.87
5.18


France
…
…
10.20
9.87
8.07
5.45
6.23


Saar District
…
…
2.07
1.88
1.49
1.33
1.57


Belgium
…
…
4.03
3.35
3.18
2.74
2.70


Total
…
…
83.97
67.50
45.73
31.81
40.05


Steel (Ingots and Castings).


United Kingdom
…
…
9.64
7.33
5.20
5.26
7.00


United States of America
…
…
56.43
40.70
25.95
13.68
23.50


Soviet Union (Russia)
…
…
4.80
5.71
5.33
5.83
6.74


German
…
…
15.99
11.35
8.16
5.65
7.46


France
…
…
9.54
9.30
7.70
5.55
6.42


Saar District
…
…
2.17
1.90
1.51
1.44
1.65


Belgium
…
…
4.07
3.32
3.07
2.76
2.70


Total
…
…
102.64
79.61
56.92
40.17
55.47


(a) Provisional figures.

STRAWBOARD.

Vice-Admiral TAYLOR: 40.
asked the President of the Board of Trade whether his attention has been called to the fact that the imports of strawboard from the Netherlands have increased from 345,000 cwts. in the first two months of 1932 to 928,000 cwts. in the corresponding period

not aware of the existence of any similar law or regulation in any other foreign country. The question of the general policy to be pursued with regard to British shipping is under the consideration of the Government.

IRON AND STEEL INDUSTRY.

Mr. G. HALL: 38.
asked the President of the Board of Trade the total output of pig-iron and steel in the years 1929, 1930, 1931, 1932 and 1933, respectively, in the United Kingdom, United States of America, Russia, Germany, France and Belgium?

Dr. BURGIN: As the answer contains a table of figures, I will circulate it in the OFFICIAL REPORT.

Following is the answer:

of 1934; and whether, in view of the possibility of a trade agreement being reached with that country, he will give suitable protection to the British straw-board industry?

Dr. BURGIN: I am aware of the facts to which my hon. and gallant Friend draws attention. As regards the second
part of the question, I would refer to the reply given on the 28th March to the hon. Member for Jarrow (Mr. Pearson).

Vice-Admiral TAYLOR: As I am afraid I do not know what that reply was, I hope the Minister will take steps to protect the British strawboard industry, which is of the utmost importance to the agricultural interests.

Dr. BURGIN: The reply was that negotiations with the Netherlands were about to begin, and these 'are expected to begin next week.

OTTAWA AGREEMENTS.

Mr. PERKINS: 46 and 47.
asked the Secretary of State for Dominion Affairs (1) whether it is the intention of the Government to continue the Ottawa Agreements after next June;
(2), whether he can give an assurance to the House that the existing Ottawa Agreements will not be continued after their expiration except on a more reciprocal basis?

The SECRETARY of STATE for DOMINION AFFAIRS (Mr. J. H. Thomas): It is provided in each of the agreements concluded with the Dominions at Ottawa that they shall remain in force thereafter subject to six months' notice. No question as to their continuance, therefore, arises at present, but I could not accept the hon. Member's suggestion that the agreements are not on a reciprocal basis.

Mr. PERKINS: In the interests of British agriculture, will the right hon. Gentleman not give notice to terminate the agreements at the earliest possible moment?

Mr. THOMAS: If my hon. Friend will put that question down, an answer will be given.

Vice-Admiral TAYLOR: Are not these agreements now of the greatest benefit to this country?

IMPORT DUTIES, AUSTRALIA.

Mr. PERKINS: 48.
asked the Secretary of State for Dominion Affairs whether he will give a list of the cases in which the Australian Government have increased the duties against British manufactured goods
since the signing of the Ottawa Agreements?

Mr. J. H. THOMAS: I am sending the hon. Member a list of five cases in which the duties in the Commonwealth of Australia on goods manufactured in the United Kingdom have been increased since the conclusion at Ottawa of the Trade Agreement between the United Kingdom and Australia.

Mr. PERKINS: Does not the right hon. Gentleman consider that these increases in the Australian tariff against British manufactured goods are contrary to the whole spirit of the Ottawa Agreements?

Mr. THOMAS: If you take out five items which are increased against us it looks bad, but in order to strike a balance you must look at the other side where there are 149 items in our favour.

Oral Answers to Questions — SCOTLAND (MILK PRICES).

Mr. KIRKWOOD: 41.
asked the Secretary of State for Scotland how many protests he has received from Greenock against the decision of the Scottish Milk Marketing Board to charge winter prices for summer supplies; has he any estimate of the increased cost to Greenock because of the higher prices for milk; and what action he intends to take to revise the milk board prices so that Greenock consumers will obtain supplies during the summer at lower prices?

The SECRETARY of STATE for SCOTLAND (Sir Godfrey Collins): As regards the first part of the question, the number of protests received from Greenock is 14. I have no information with respect to the second part of the question. As regards the last part, these protests and all other similar protests on the subject have been referred to the Scottish Consumers' Committee in accordance with the procedure laid down by the Agricultural Marketing Act, 1931. On receipt of the report of that committee, I shall consider what further action is necessary.

Mr. KIRKWOOD: Will the right hon. Gentleman have regard to the facts in the information that he does possess regarding the increase in the price of milk, and will he use his influence to see that the same price will prevail for the
milk of the poor, so that it does not affect the women and children more than anybody else?

Sir G. COLLINS: As my hon. Friend knows, my hands are tied in this matter. I must conform to the procedure, which is clearly laid down in the Agricultural Marketing Act, 1931, and to that Act I must pay strict attention.

Mr. KIRKWOOD: Is the right hon. Gentleman aware that this is going to affect the hospitals and that milk is practically the main diet for invalids and children?

Sir G. COLLINS: All these matters will be taken into consideration by me when the report of the committee of investigation reaches me. Until then, I can take no steps at all.

Mr. THORNE: Will the right hon. Gentleman ask for power from the Government to cut the knot that ties his hands in connection with this question?

Sir G. COLLINS: No. The procedure laid down in the Act safeguards the interests of the consumers through the Consumers' Committee, to whom these protests must first go, and then they pass to the committee of investigation, who investigate all the matters, and from them they go to the Minister in charge, who then must take a decision in the matter.

Oral Answers to Questions — NATIONAL HEALTH INSURANCE.

Mr. GEORGE HALL: 42.
asked the Minister of Health the total surpluses disclosed by approved societies under the National Health Insurance as the result of the last three valuations, giving each valuation separately?

The PARLIAMENTARY SECRETARY to the MINISTRY of HEALTH (Mr. Shakespeare): I would refer the hon. Member to the reports by the Government Actuary on each of the valuations of the assets and liabilities of approved societies, copies of which I am forwarding to him.

Oral Answers to Questions — LONDON REFUSE (DISPOSAL).

Mr. LUNN: 43.
asked the Minister of Health whether the Committee on London Refuse have finished their deliberations; and, if so, will he state the nature of their conclusions?

Mr. SHAKESPEARE: I would refer the hon. Member to the reply given yesterday to a similar question by the hon. Member for Walthamstow, West (Mr. McEntee).

Oral Answers to Questions — COAL INDUSTRY.

DURHAM.

Mr. BATEY: 44.
asked the Secretary for Mines the number of persons employed in and about the coal mines in the county of Durham for the week ended 30th December, 1933, and the corresponding week in 1932?

The SECRETARY for MINES (Mr. Ernest Brown): The number of wage-earners employed at coal mines in the county of Durham during the week ended 30th December, 1933, was 106,600 and during the week ended 31st December, 1932, 101,300.

COAL MINES BILL (OWNERS' PROPOSALS).

Mr. BATEY: 45.
asked the Secretary for Mines whether the proposals before the coalowners as a substitution for the provisions of the Coal Mines Bill are the same as provided in the Bill; and, in the event that they are not the same, will this House be given an opportunity of amending the coalowners' proposals?

Mr. E. BROWN: The proposals under consideration by the colliery owners deal with the same points as the Coal Mines Bill, but the owners' proposals provide for separate allocations for inland and export coal instead of freeing export coal entirely from quantitative control as provided in the Bill. The Parliamentary procedure under which they can be made effective permits of discussion, but not of amendment.

Mr. BATEY: Is the hon. Member in a position to say whether the Government will take steps to withdraw the Bill if he has received the report from the coalowners?

Mr. BROWN: I shall know when I have seen the report of the last district, which I think will be early next week.

Mr. DICKIE: If the Minister is prepared to accept Amendments in the Bill made by the coalowners, will he not undertake to give consideration to proposals made in this House for Amendments in other desirable directions?

Mr. BROWN: The procedure is laid down in the Act.

Mr. TINKER: Will the hon. Gentleman make a statement to the House after he has seen the coalowners?

Mr. BROWN: There are some questions down for next week.

Oral Answers to Questions — POST OFFICE.

HONG KONG MAILS.

Mr. BURNETT: 49.
asked the Postmaster-General whether mails to this country from Hong Kong sent via Siberia are transmitted via Dairen and Manchuli or via Vladivostok?

The ASSISTANT POSTMASTER-GENERAL (Sir Ernest Bennett): According to the latest information in my possession, mails to this country from Hong Kong sent via Siberia are forwarded via, Japan, Fusan, Hsinking and Manchuli.

Mr. BURNETT: Is there not considerable dislocation of business and widespread complaint resulting from the delay?

Sir E. BENNETT: In any case, the responsibility for the routes for the carriage of mails coming from the Colonies to this country is solely the responsibility of the Colonial post offices concerned.

Mr. SIMMONDS: Are these mails forwarded to this country by air, or by obsolete methods?

Sir E. BENNETT: If the train is an obsolete method, it is obsolete, because the mails are forwarded by train.

GLASGOW (OVERHEAD CONVEYOR).

Mr. LEONARD: 50 and 51.
asked the Postmaster-General (1) the cost of installing the overhead conveyor band in the Glasgow general post office which extends from the primary sorting section to the foreign sections; the monthly running costs, inclusive of motive power, repairs, oiling, cleaning, and painting; whether he can state if this installation has enabled a reduction of staff; and, if so, the number and saving effected;
(2) if his attention has been called to complaints made by the staff of the Glasgow general post office against the unsatisfactory functioning of one of the
conveyor belts, alleging excessive noise above a section of the staff, occupation of excessive space, obscuring the light, and, at the gravity chute adjacent to the West News Road, constituting a danger to the staff; and if he proposes to take any action calculated to remove the defects and permit the staff to work without the annoyance this particular conveyor causes?

Sir E. BENNETT: I am having inquiries made regarding the points raised relative to the installation of the conveyor at the Glasgow head post office and will write to the hon. Member in due course.

Mr. LEONARD: Will the hon. Gentleman see that this is done as speedily as possible in order to prevent the likelihood of charges of inefficiency being directed against employes working there?

Sir E. BENNETT: Everything in the Post Office is done in the least possible time.

Oral Answers to Questions — HOME OFFICE TRAINING SCHOOLS.

Lieut. Colonel Sir ARNOLD WILSON: 52.
asked the Secretary of State for the Home Department the number of male adolescents under instruction in Home Office training schools at the latest date for which records are available; the average cost per head; and the number of vacancies now existing?

The SECRETARY of STATE for the HOME DEPARTMENT (Sir John Gilmour): On the 7th instant there were 3,066 boys in the intermediate and senior approved schools, receiving respectively boys aged 13 and under 15, and 15 and under 17 at the date of committal by the courts. The estimated average cost per head for 1934–5 is approximately 27s. a week. The vacancies in these two classes of school on the 7th instant were 138 and 264, respectively.

Oral Answers to Questions — BRITISH UNION OF FASCISTS (DEMONSTRATION).

Mr. THORNE: 53.
asked the Home Secretary if he is aware that the British "Union of Fascists are holding a demon stration on Sunday, 22nd April; that applications for tickets have been received from Germany, Italy, Spain, and Denmark; and what action he intends to take to preserve peace and good order?

Sir J. GILMOUR: Yes, Sir. I am aware of the proposal referred to, and I can assure the hon. Member that such precautions as are thought to be necessary will be taken.

Mr. THORNE: In the event of permission being asked for the delegates from these countries, will they be granted?

Sir J. GILMOUR: I have no knowledge of any such applications.

Oral Answers to Questions — INDUSTRIAL ASSURANCE COMMITTEE (EVIDENCE).

Sir A. WILSON: 54.
asked the Financial Secretary to the Treasury why the Crown copyright has not been reserved on memoranda of evidence submitted by interested parties to the Industrial Assurance Committee; and whether he will ensure that such documents, when published by the Stationery Office, should in future be the exclusive coypright of the Crown?

The FINANCIAL SECRETARY to the TREASURY (Mr. Hore-Belisha): It is now the practice to print on all Government publications of this kind the words "Crown Copyright Reserved," but the absence of this marking does not affect the legal position, which is governed by Section 18 of the Copyright Act, 1911.

Sir A. WILSON: 55.
asked the Financial Secretary to the Treasury why certain appendices to the minutes of evidence before the departmental committee on Industrial Assurance containing ex parte statements, printed in the first instance at the cost of interested parties, are published by the Stationery Office as official publications apart from the body of relevant evidence; and whether he has considered the abuses to which this practice may give rise?

Mr. HORE-BELISHA: It is the practice of the Stationery Office occasionally, if such a course is otherwise convenient, to save the cost of double composition by purchasing, for official publication, copies of memoranda such as the appendices to the minutes of evidence before the Departmental Committee on Industrial Assurance, which have already been set up in type by the parties giving the evidence. The practice is economical and I am not aware of any abuses to which it has given rise.

Oral Answers to Questions — DISARMAMENT (FRENCH NOTE).

Mr. ATTLEE (by Private Notice): asked the Secretary of State for Foreign Affairs whether he has received any further communication from the French Government on the subject of disarmament?

Sir J. SIMON: Yes, Sir. The text of the French Note was handed to His Majesty's representative in Paris last night. This Note will be published with other relevant documents in a White Paper which will be available in the Vote Office this evening.

Oral Answers to Questions — MESSAGE FROM THE LORDS.

That they have agreed to,—

Marriage Act (1886) and Foreign Marriage Act (1892) Amendment Bill, with Amendments.

SELECTION (STANDING COMMITTEES).

STANDING COMMITTEE C.

Mr. William Nicholson reported from the Committee of Selection; That they had discharged the following Members from Standing Committee C: Mr. Colman, Mr. Henderson Stewart, and Mr. John Wallace; and had appointed in substitution: Major Lloyd George, Mr. Storey and Mr. Scrymgeour Wedderburn.

STANDING COMMITTEE D.

Mr. William Nicholson further reported from the Committee; That they had discharged the following Members from Standing Committee D: Sir George Hamilton and Mr. Robert Smith; and had appointed in substitution: Sir Percy Hurd and Mr. Levy.

Mr. William Nicholson further reported from the Committee; That they had discharged the following Members from Standing Committee D (added in respect of Water Supplies (Exceptional Shortage Orders) Bill): Mr. Daggar, Mr. Temple Morris, Sir Luke Thompson, and Miss Ward; and had appointed in substitution: Sir George Clayton, Mr. David Davies, Mr. MacAndrew, and Mr. James Stuart.

Reports to lie upon the Table.

DARLINGTON CORPORATION BILL.

Reported with Amendments [Costs awarded, Title amended]; Report to lie upon the Table, and to be printed.

Orders of the Day — WAYS AND MEANS.

Considered in Committee [Progress, 17th April].

[Captain BOURNE in the Chair.]

AMENDMENT OF LAW.

Question against proposed,
That it is expedient to amend the law relating to National Debt, Customs, and Inland Revenue (including Excise) and to make further provision in connection with finance."—[Mr. Chamberlain.]

3.31 p.m.

Mr. MORGAN JONES: Most Members of this Committee have at some time or other felt called upon to ask the indulgence of their fellow Members. I have never felt so con strained to invite that indulgence as I do this afternoon, and I am quite sure that I shall get it in full measure from the Committee. I am discharging a very onerous task, and one to which I am unaccustomed, and I hope, therefore, that I may have the sympathy of the Committee. At the same time I am pleased to confess that the task which I have to discharge has been made considerably easier by reason of the most excellent exposition of the Budget which we had from the Chancellor yesterday afternoon. Its lucidity made his mind quite clear to us, and I am very grateful to him for having in that way lightened my task. He told us in the early passages of his speech that he rejoiced that the clouds were lifting from the horizon and that various shafts of light were piercing those clouds. It would be churlish on my part not to recognise that there is a substantial improvement in our national situation; it would, indeed, be an act of poor citizenship if I did not rejoice at that fact, with everybody else. At the same time it is as well to see this matter in its proper proportions and perspective. The Chancellor himself, in referring to the past, used the expression "world depression" at least once in his speech. The phrase was an entirely appropriate one. But just as there was a "world depression" some years ago, it is equally true that there is a considerable measure of world revival at this moment. That revival is in no wise confined to our own country. I base that observation upon a report issued by the International Labour
Office on Monday of this week, in which I read this passage in a review of the last quarter:
For the fourth consecutive quarter an improvement in the situation may be observed. If the figures in the latest month for which statistics are available be compared with those of 12 months previously, thus eliminating seasonal movements, it is seen that unemployment is lower practically everywhere, and the rate of decrease is usually greater than it was three months ago.
It goes on to say:
The countries which show the largest percentage increase in employment are the United States, Canada and Germany, and considerable increases are also shown in Great Britain, Estonia, Japan, Latvia and South Africa. These increases are confirmed to a large extent by the statistics of unemployment.
We rejoice that we share in that revival, but let us not be forgetful of the fact that it is a world revival, just as the depression was a world depression. I turn to make a preliminary observation upon the record of the financial year which has just closed. I have been somewhat interested in reading all sorts of papers during this last week end, to observe what the experts have felt concerning the previous 12 months' financial operations in so far as they affect the Budget. It was extraordinary to note how with one accord, the supporters of the Government in the Press united to rejoice in the fact that there was a surplus. Was there really a surplus; or shall I put it, Should there have been a surplus? Let me put it in this way. Suppose the present Government were a Labour Government and not a Conservative Government, and that that Government had presented exactly the same statement. Suppose, further, that a Committee like the Sir George May Committee sat in judgment upon that statement. What would its observations have been like? Let me quote from Sir George May's Report upon the Budget of 1931, page 15, paragraph 29. By the time Sir George May and his colleagues had reached page 15 they were in a condition of increasing and aggravated fright, and said:
The Budget of 1931 has been balanced largely with the aid of nest eggs.
I refer to the Budget of April, 1931. Let me paraphrase that. I can say in the same terms: "The Budget of 1933–34 has been balanced largely with the aid of nest eggs." One of the most formidable
nest eggs was the taking of £21,000,000 from the unemployed. A question was addressed to the Minister of Labour by my hon. Friend the Member for Chester-le-Street (Mr. Lawson) a week ago. He asked:
The total amount saved on unemployment benefit since the reduced rates came into operation in 1931 and the total amount saved since the operation of transitional payments.
The Minister of Labour's reply was as follows:
Between October, 1931, when the new rates of benefit were introduced, and the end of March, 1934, the consequent reduction in the amount of insurance benefit paid to persons who continued in receipt of benefit averaged about £5,500,000 per annum. In approximately the same period, the amount paid under the transitional payments scheme averaged about £21,000,000 a year less than the sum that would have been paid if it had been possible to continue the payment of benefit to all claimants and to do so at the old rates."—[OFFICIAL REPORT, 11th April, 1934; col. 312, Vol. 288.]
That was a very substantial nest-egg to use to balance the Budget. Let me take another. The Chancellor of the Exchequer rejoiced at the fact that Death Duties had had a special windfall of about £10,000,000 from one estate. It is true that that was a windfall, but it would have happened to any Chancellor. Were it not that that windfall came by chance to the Treasury, the Budget would not have shown a surplus at the end of the year. May I say in passing, lest I overlook the point, that in the course of his speech the Chancellor estimated that he is going to receive less in the way of Death Duties. Does he not anticipate another nest-egg from the same estate? If rumour speaks truly, this estate is one of very substantial proportions. I have heard it estimated that it is worth between £20,000,000 and £30,000,000. If so, I would like to know whether the right hon. Gentleman does not anticipate that, when this estate is finally wound up, he will receive a further substantial sum in respect of it. That will be a nest-egg for next year's calculations.
The third point to which I want to direct attention, in respect of this surplus, is the question of the Debt to the United States of America. Let the Committee recall that last year we did not provide for any payment in respect of the Sinking Fund. I wish to ask a
question of the Financial Secretary to the Treasury to which I hope he will find it possible to reply when he speaks later in the evening. The subject of the payment of our Debt to America is, I know, one of great controversy in all parts of the country. I would like to know what the omission of a provision in respect of that indebtedness implies in this year's Budget. We have a right to know. If my memory does not play me false, on 15th June of this year the question must again officially arise as between the two nations, and this House is entitled to know what the omission implies in the way of Government policy regarding that external Debt. Does it imply repudiation? Let us know. What does it imply?
May I make this point too? The newspapers which are supposed to support the Government have boosted the surplus accruing from last year's operations to an extraordinary degree. They had a regular political ballyhoo over the weekend. They now have to face up to the proposition that, whatever happens, that exploitation of the alleged existence of a surplus will be known not only to the American Government but to the American public. You will have to provide an adequate reason for the American public as to why, seeing that you have a surplus as you say, you should not resume the payment of the Debt. I wonder whether the right hon. Gentleman will tell America: "Of course I had a surplus, but, when you come to examine it, there was the £22,000,000 which I had to take from the unemployed of my own country, and therefore I really must ask you to excuse me from any further contribution." It is time that we knew the Government's view of this matter.
Those three points: the deduction from the unemployed of £21,000,000; the gratuitous advent of that extraordinary sum into the Death Duties, and the non payment of the instalment upon the American Debt clearly show that there is no substance in the case that there was a decent, legitimate surplus. In the political crisis which gave rise to the change of Government in 1931, one of the very elements—I will not say the whole of it—in the dispute between the Prime Minister and his colleagues was, should the question of paying into the Sinking Fund be postponed so as to avoid mulct-
ing the unemployed in a cut in their benefit, or should the Government insist upon paying the Sinking Fund to the detriment of the unemployed? The then Chancellor of the Exchequer insisted upon the Sinking Fund payment being adhered to, and the unemployed lost. Now the unemployed are still without their restored benefit up to this year, but the Sinking Fund payment has also had to be abandoned.
I turn from that to an examination of a larger issue involved in this question of debts. Hon. Gentlemen will have had a copy of the Budget supplement of the "Economist" during the week-end, and in that Budget supplement are returns indicating the state of the dead-weight Debt. I observe that an estimate was given by the "Economist" supplement to the effect that the state of the deadweight Debt at the end of the financial year would be about £7,808,000,000, an increase on the previous year of £164,200,000. We have raised the question as to the attitude of this country towards this heavy burden of national debt more than once since the War. We have raised the issue as to whether it is appropriate for this country that we should leave this burden to be dealt with by posterity. I know, and I readily acknowledge, that the Government have carried through a conversion scheme in respect of some £2,000,000,000, or rather more. That is quite true. But may I say also that, while I do not in any way desire to detract from the Chancellor's credit in regard to that matter, yet in point of fact every single item of the arrangements in connection with that conversion was prepared long before the change of Government in 1931? That sum is a very formidable sum, and the party for which I speak propounded its own proposals in a General Election some years ago.
May I remind the House that the late Mr. William Graham once declared in this Chamber, on the authority of a financial authority whom he did not name, that the total expenditure incurred by this country during the six years from the 31st March, 1914, to the 31st March, 1920, was greater than the total expenditure of this country right back to the Revolution of 1688—greater, that is, than the expenditure of nearly two and a-half centuries. That is a formidable fact. May I also mention that the Select Com-
mittee on War Wealth appointed in this country estimated that 300,000 people in this country received—I prefer to say "took," for, although that is not perhaps so eloquent a phrase, it certainly is accurate—in War wealth, between £4,000,000,000 and £6,000,000,000. We proposed our scheme for dealing with that situation, but it was rejected—at the polls, if you like. What is the alternative? Here is the alternative, in these figures year by year. It means that, while our scheme, if it had then been accepted and implemented, would have made a very substantial difference to the power and resiliency of industry in subsequent years, the alternative has landed this country in the most appalling expenditure in various ways. Hon. Gentlemen opposite do not like doles. I do not like doles myself, nor does anybody else, but there is no alternative; when men are unemployed, they are bound to be maintained.
The right hon. Gentleman the Member for Carnarvon Boroughs (Mr. Lloyd George), broadcasting some two or three weeks ago, said that on unemployment benefit, since the middle of 1920, this country has spent £1,100,000,000. I do not deplore, so far as the right of the people to receive it is concerned, one penny of that expenditure, much as I regret the necessity for it. [An HON. MEMBER: "Capitalism paid it."] Is the hon. Member aware of the degree to which Capitalism has been on the dole? I will inform him, because it is important. Speaking of the post-war period, the Trade Facilities Act has accounted for £64,000,000, and Export Credits for £38,000,000, and De-rating for £63,000,000. Coal received £30,000,000; Sugar Beet, £42,000,000; Shipping, £9,000,000; the Milk Board, £3,500,000—in the first year; the Bacon Board, £10,000,000; the Wheat Board, £4,750,000; and Civil Aviation, £2,800,000. Private industry, for housebuilding, has taken £123,000,000 and the Exchange Equalisation Fund, which I presume had to be established because the Bank of England would not do the job it was intended that it should do, has £375,000,000 to play with—a little more corn, as it were, for the birds on Penguin Island. I am speaking of doles. I know that hon. Gentlemen opposite call them subsidies, but when is a dole not a dole? Clearly, when it is a subsidy.
Those burdens have fallen upon the national finances, largely, I submit, because we have not faced up to this staggering and increasing burden of the national dead-weight debt; and let this Committee not be blind to the fact that sooner or later the country will be compelled to deal with this impossible burden which it is struggling to carry on its shoulders.
I turn to a second item of interest which was presented to our notice in the statement of the Chancellor of the Exchequer yesterday, namely, the expenditure upon armaments. I do not propose this afternoon, because, I presume that the mind of my party in relation to the question of armaments is well known to the Committee, to dwell unduly upon it, but I want to point out that that expenditure on armaments is the only serious item of increased expenditure in the Estimates for this year. The Civil Estimates are down; expenditure on armaments is up. Apropos of this question of armaments, it seems to me that a passage from the Budget Supplement issued by the "Economist," to which I have already referred, is not without interest. It is this:
In comparing present-day expenditure with that of 1913–14, it should be borne in mind that the post-War Estimates for the Army and Navy have to make provision for heavy non effective charges—pensions, retired pay, etc. These charges are estimated in 1934–35 to amount to £17.9 millions, as compared with £6.9 millions in 1913–14.
After giving a comparative table all along the years, it winds up thus:
It will be seen that effective charges in 1934–35 are estimated at £95.8 millions, an increase, including the Air Force, of over 40 per cent. above the pre-War level.
All that I need say on the matter is that we deplore that figure and can only urge with every emphasis at our command our desire that the Government shall steel itself against this ramp which has been in progress recently to compel it to increase its armaments.
I turn to the third question about which I want to speak, namely, the relationship between direct and indirect taxation. I want to compare the figures presented to us in the White Paper issued yesterday with the figures that were presented in the Labour Budget of April, 1931.
In 1931 Customs were expected to produce £121,500,000. In this Budget the Chancellor hopes to receive £183,600,000. Excise in our Budget was put at £124,000,000, while the Chancellor hopes to receive £106,300,000. Adding Customs and Excise together in our Budget, we anticipated to get £245,500,000, and the Chancellor hopes to receive £290,000,000—a very substantial addition to indirect taxation as compared with direct taxation. If I put those figures in percentages, perhaps the change will seem equally, if not more, striking. In 1924–25 the percentage of indirect taxation was 35; in 1934–35 the percentage is 43.6 of the tax revenue. In 1924–25 the direct taxation was 65 per cent.; and in 1934–35, it is 56.4. Clearly, there is a definite change in the balance between direct and indirect taxation. May I add this observation? I know that well-to-do people make their contribution—that is obvious—but it is not an exaggerated estimate to submit that four-fifths of indirect taxation is borne by the poorer classes of the country. No doubt I shall be told by the right hon. Gentleman, in subsequent Debates, that, in point of fact, this is a burden which we are able to pass on to the foreigner. I am not sure that the right hon. Gentleman did not commit himself to that in part on the wireless last night.

The CHANCELLOR of the EXCHEQUER (Mr. Chamberlain) indicated assent.

Mr. JONES: I am glad that the right hon. Gentleman has confirmed my impression. Let me, therefore, read to him a resolution arrived at by the Scottish Provision Trade Association, which I read in the "Manchester Guardian" on Saturday last. This is how it reads:
The statement made in the House of Commons by Mr. Skelton, Under-Secretary for Scotland, that 'the pig and bacon scheme had been a remarkable success' has caused the Scottish Provision Trade Association to send a letter to Members of the Government and to Scottish M.P.s, which includes the following passages:
'The operations of the Bacon and Ham Marketing Board are inflicting widespread hardship and injustice on many sections of the community, and most severely and harshly on the great mass of the industrial workers throughout the country.…As a result of the Government's stranglehold on trading, this country paid in 1933 to foreign producers
no less than £10,000,000 more than they required to do for their bacon and ham supply. On the basis of January and February of this year the overprice paid to the foreign producers for our supply for 1934 will amount to a further £11,000,000 or £12,000,000.'
I have quoted from a Liberal newspaper. It is true that it is a report without any editorial comment. Let me now quote from what, I think, is a Conservative paper—the "Birmingham Gazette," of 16th March. [HON. MEMBERS: "Liberal."] I should not like to do an injustice. This is the statement of Mr. Sainsbury in a letter published in the Press on 16th March:
It is extremely interesting to compare the average price of bacon during the last three months of the pre-quota period with the average price during the months of November, December and January last, when the quota was in full swing. From November, 1931, to January, 1933, we imported 2,824,892 cwt. at an average of 48s. per cwt., and a total cost of £6,776,389. Two years later for the same period, under the quota, we imported 1,964,623 cwt. odd at an average of 70s. per cwt. and a total cost of £6,883,876. It will thus be seen that the average price has jumped up 22s. per cwt. (from 48s. to 70s.) and the total paid is £107,489 more than the 1931 figure for nearly 1,000,000 cwt. less Or to put it another way: taking the 1,964,623 cwt. imported in the three months 1933–34, the cost at 70s. per cwt. was £2,111,085 more than was paid for a similar quantity in 1931–32 at 48s. per cwt.
If the right hon. Gentleman still cares to tell me that the foreigner pays, I shall be most interested indeed to hear the argument as to how that operation is sustained. I know that the Government have maintained openly and frankly that it is part of their policy to raise the prices of commodities. [An HON. MEMBER: "Wholesale."]—wholesale prices. Inevitably, it seems to me, that if wholesale prices are raised, in due time retail prices are affected by it, and I want to submit to the right hon. Gentleman that, whatever there may be in that policy, it cannot be effective in the long run until greater purchasing power is enjoyed by the large mass of the people of the country. It is purchasing power in the long run that will help to create the home market.
The fourth point which I wish to make, therefore, is in relation to the concessions which the right hon. Gentleman announced yesterday. My hon. Friend the Member for Limehouse (Mr. Attlee) said that it was quite easy to be generous
at somebody else's expense, and I think that that observation in relation to this Budget was a perfectly just one. Let me take one concession which, as a matter of merit, compared with other claims I would not put first by any means. Take the concession to motorists. After all, motoring is a luxury business. At any rate it is the heavier horse-power cars which go abroad, and, in order to help that particular side of the motoring trade, the right hon. Gentleman made a concession. It is not going to cost him very much; he is going to take it out of the Road Fund. It is a case of feeding the dog on its own tail.
Take the unemployed. I, and I am sure all my hon. Friends, too, welcome the concessions. But let me examine the concessions for a moment. First, let me take the statutory benefit. The right hon. Gentleman is not providing that concession; it will not cost him a penny. He is going to find that money from the Unemployment Insurance Fund. Let me put it in a homely way. Suppose his son came to him and said, "Father, you were rather at a loss for a pound last week, and I lent you a sovereign. Do you mind letting me having it back?" "Certainly my boy," he says, "Where is your money-box" and promptly he takes the pound out of the boy's money-box and says, "See how generous your father is!" The right hon. Gentleman knows perfectly well that the employed are under an obligation to contribute to the Unemployment Insurance Fund, and the right hon. Gentleman makes a parade of his generosity by saying that he can restore the statutory benefit while restoring it at somebody else's expense, and not his own. Let me say this in passing: the employed have had to pay an increased contribution into this fund.
May I put another point? The right hon. Gentleman has said that he has restored all other cuts or impositions. The extra 6d. imposed in 1931 upon the direct taxpayer is to be restored immediately, but the unemployed must wait for the gracious permission of the Chancellor till 1st July. Why must they wait? I am quite prepared to accept, and cordially do accept, the statement of the Chancellor as to the horror with which he visualised the imposition upon these deserving people in 1931. But if they have wrung his heart to this enormous extent, why is it that the direct taxpayer
gets his tax relief from the beginning of the financial year, whereas the unemployed man must wait until 1st July?
Let me take transitional payments. It is true that £3,600,000 is to come out of the Treasury. So far so good. But again I ask, why are people, who have been called upon to face these dreadful impositions for two and a half years, to wait another three months, when the direct taxpayers must have the concession immediately? May I take the matter further? I know that the children's allowance remains unchanged. It was 2s. pre-1931; it is 2s. now, and, of course, there is no question of restoration there. But the condition of the child receiving the 2s. per head in pre-1931 days was not a condition which anyone would envy particularly. Two shillings per week per child is not exactly affluence. All it can do is to maintain life, or little more, and real life is more than meat and raiment. For one's own children one likes to provide an opportunity of better education, one likes to give good housing if possible, and one likes to see them well clad, and no one can argue that 2s. per child, if the country is facing a condition of greater prosperity, is an adequate basis to provide for them.
Let me turn to the direct taxpayer. Let me assume for the sake of my argument that he has a legitimate claim. The question that arises is which direct taxpayer has the first claim and in what way. Should it be a restoration of 6d. to all or should it be a restoration first of the allowances? For myself, and I think for my hon. Friends as well, we should unhesitatingly say that the claim for the restoration of the allowances stands first. It is a question of providing purchasing power with us all the time and, to my mind, you would much more adequately assist and stimulate industry if you extended the power to buy goods in respect of more people than if you concentrate the concession upon a smaller number of people. If the hon. Member who interrupts me will examine the incidence of this, he will find that, comparatively speaking, the man above the £400 or £500 limit of income gets a much better return out of this than does the poorer man.
Hon. Members opposite are great believers in the need test. Why do you not apply the spirit of the need test in
this matter? After all, men with children have a greater call upon you from the standpoint of need than those who have no children. The allowances would be a fairer way of making this restoration than the way now proposed. I have never been able to accept the proposition in the bald way in which it is so frequently put that the restoration of this sixpence of Income Tax would necessarily lead to a restoration of trade. I do not deny that to some degree it would, but it does not follow automatically that, if you restore the sixpence, the money returned will go into industry. I am sure it is not true. Take the case of the de-rating scheme carried through in 1929. I represent a very distressed do many of my hon. Friends. There was a saving of three-quarters of the rates to productive concerns. Looking at my constituency, I see no sign whatever that a penny of that went back into the industry of the area.

Mr. PIKE: What is the industry?

Mr. JONES: Coal. So I submit that on balance, on merit, you would have a greater assurance that this money would get back to stimulate trade if you spread the purchasing power over the people with families rather than people who have no families at all.
May I say another word on the restoration of pay cuts. In my judgment, there never was equality of sacrifice in 1931. It was the poor who had to bear the heaviest burden. But, suppose there were equality, has there been equality of restoration? Take the various classes of people—teachers, policemen and civil servants. They get one-half from 1st July. The direct taxpayers get theirs from the beginning of the year. I do not deny that they will get the benefit of the sixpence in Income Tax, but they suffered the cuts in their pay and an increase of Income Tax as well. In 1931 we reduced the Income Tax limit and we roped in about 2,000,000 extra people to pay Income Tax.

Mr. MABANE: 1,200,000.

Mr. JONES: I have looked up what official figures I could, but I felt that I had to estimate it because the last figures I could find were for the year ending 1931.

Mr. MABANE: It is in the return of the Income Tax Commission.

Mr. JONES: I have not got it for this year. But, whatever figures you take, the plain fact remains that you brought between 1,000,000 and 2,000,000 people within the ambit of the Income Tax, an imposition which, in my judgment, was extremely unfair, because it involved people at a limit where it is very difficult for them to keep body and soul together. In view of the very explicit undertakings given by the Government then and since, I charge them with a definite breach of faith in this matter. They have not carried out their pledges. They told these people plainly that the cuts were only to be temporary and that, when restoration came, it should come first in respect of the unemployed cuts and the restitution of payments. The right hon. Gentleman denies that. I shall be very surprised if he can sustain the suggestion that he now makes.

Mr. CHAMBERLAIN: It is for the hon. Member to produce evidence in support of his charge.

Mr. JONES: Since I am challenged, let me take some declarations made by Ministers. The late Sir Donald Maclean, speaking on 17th September, 1931, said:
The reduction in teachers' salaries is occasioned by the national emergency and is not to be regarded as the view of the Government as to what should be the proper rate of remuneration for teachers under less abnormal conditions.
The whole case for restoration to-day is that abnormal conditions have to some degree passed away. Lord Reading said:
The noble Lord asked me whether these economies and reductions in salaries are a permanency. The answer I would make is 'No.'
I have two more quotations.

Mr. CHAMBERLAIN: The hon. Member made a definite charge against the Government which I understood he was going to sustain by evidence. The evidence that he has given so far is entirely irrelevant.

Mr. JONES: I say the pledge given was that the moment abnormal conditions were removed the first people to receive attention from the Government would be those who had sustained the cuts, and, by restoring the sixpence to direct taxpayers in advance of those who sustained salary cuts, the right hon.
Gentleman has broken the pledge that was given in 1931. I am not going to move one inch. Let me ask another question. What does the concession mean in respect of civil servants? I know there has been a special salary arrangement in respect of civil servants. Is the concession that was made yesterday one that relates to civil servants in the ordinary sense of civil servants as well as teachers, policemen and others? I think there is a good deal of apprehension on that point, and I should be very glad to have it made clear.
I want to say a few final words concerning the Budget generally. The Budget statement propounded yesterday indicated excessive caution. I am pretty certain that in the ultimate issue, the right hon. Gentleman will find himself in possession of a considerably heavier surplus than, in fact, he warned us of yesterday. I make that statement of course on the assumption of present expenditure. I rather suspect that there are considerations in this matter which are not perhaps strictly financial. I welcome, as I have said, the restoration of the cuts in unemployment benefit and also the cuts in pay, but I repeat, that I see no reason whatever why the restoration of cuts in benefit and in pay should not start from the beginning of the financial year like the other direct taxation. These two items cry aloud for immediate redress. May I say to the right hon. Gentleman that, having restored unemployment benefit and pay cuts, with which I cordially agree, I feel that he should have seized the opportunity of an expansionist policy in regard to public works.
Hon. Gentleman are anxious for money to be restored and put back into industry. I understand that fact very well, but the banks at this moment are bulging with money. The trouble is not that. Private industry is afraid to make endeavours for new developments in various spheres. The Government, therefore, should make their contribution. If they developed public works, whatever form they might take—water, houses, electrification, transport and slums—they would surely be providing in the initial stages that purchasing power which, in its due turn, would, in the guise of new demands for new goods, justify the expenditure of more private money.
There is another suggestion I want to make. I cannot understand why the Government adopt so hard an attitude towards the young of the nation. Why are they so cruel to the young people of this nation? It is the young, after all, who suffer most from slumdom. The brand of bad housing rests upon them all through their lives. It is they who suffer most and the longest if they suffer from underfeeding, and it is they, as the House knows, who are learning the habit of idleness in the land. It is the children to whom doctors call attention, and who cause anguish to teachers. It is the cause of the children for which social workers are constantly pleading. It is not so much the Britain of to-day to which we want to pay attention now as the Britain of to-morrow. The Budget betrays no sign of vision in that respect. The Chancellor of the Exchequer has not more than glimpsed the problem of poverty in the midst of plenty. He is facing a new world, chained and shackled by the ideas and conventions of the old world. He told us yesterday that he had finished the book of "Bleak House," and had started the first chapter of "Great Expectations." For the rich, that is true. For the poor, they know to-day that from this great House they can derive only bleak expectations.

4.36 p.m.

Sir HERBERT SAMUEL: The Budget presented this year, taken as a whole, is undoubtedly one in which this Committee and the country can take 'a very large measure of satisfaction. As the Chancellor of the Exchequer said in his statement of yesterday, the contrast between the state of the national finances this year and what it was in 1931 is most remarkable and most welcome. In 1931 the country was faced with an actual deficit of some £70,000,000, and a threatened deficit for the following year of £170,000,000. We have stopped borrowing for unemployment, but, nevertheless, this year there is a realised surplus of £39,000,000 and a prospective surplus for next year of £29,000,000. That I regard as the vindication of democracy. We need no dictators here to teach us how to put our finances in order. When there came a crisis there was a call for common action among the leaders of the various parties which was responded to for that purpose.
We banded together, with Lord Snowden as Chancellor of the Exchequer, and we introduced two Budgets imposing heavy taxation and making many drastic reductions of expenditure, and the outcome of that enabled the Budget to be balanced and so made possible the great Conversion Loan which Lord Snowden had prepared, and has realised the more favourable financial situation of to-day. As the Chancellor of the Exchequer has said, confidence is the very first condition of prosperity—that the country should have confidence, and other countries should have confidence in our financial institutions, and that the Budget should be balanced in order that the credit of the State should be established. That is obviously the prime factor in the recovery of trade and in ending unemployment.
On the question of national credit, I should like to refer to one matter which was briefly touched upon by the hon. Member who preceded me, namely, the question of the American debt, which, I think, this Committee would be wrong to ignore or to pass lightly by. The Chancellor of the Exchequer yesterday made no mention of what was one of the most important, though, unhappily, not one of the most fruitful of his undertakings during the last year, namely, the despatch of a Financial Mission, headed by Sir Frederick Leith-Ross, to Washington, to endeavour to negotiate a revised settlement. Unfortunately, those discussions proved abortive. The whole world in these days is littered with the debris of abortive conferences. But certain things have already become clear. Public opinion in America, I think, realises that it would be unjust that this country should be placed in the position, on the one hand, of being obliged to remit the payment of all the sums due to it, while, on the other hand, it should be required to pay in full all the sums owing by it to its creditor.
I think that that fact is realised now in the United States, and further, that it is realised that the settlement previously arrived at some 10 years ago imposed an excessive burden and must be very largely written down. In some quarters there, though perhaps not generally, it is gradually becoming to be realised that, if payment in part of this debt is to be effected, it must take the form of payment in goods
and services. The United States is beginning to see that there is no use being cluttered up with vast masses of useless gold and silver and that any attempt to pay in cash, so to speak, is economically futile and, in the long run, almost impossible. We have had declarations from the President and from others to the effect that tariff adjustments are in prospect with the view of opening more widely the channels of international trade to and from the United States. I do trust that the Government will not consider that this whole subject is closed, but that they will eagerly welcome any opportunity along those lines of arriving at an amicable settlement.
Taking a broad view of world affairs, the factor which is of most importance for the future is that there should be a feeling of the greatest confidence and good will between the public opinion of this country and of the United States. It is essential to both of us, and it is essential in the long run for the peace, welfare and progress of the whole world. If we had the public opinion of the United States against us, feeling that they have a real grievance and that we are not endeavouring to fulfil any part of our obligations, the existence of which is undeniable and undenied, it would be a disaster from every point of view to the whole world. Furthermore, some day, who can tell, this country may again find itself involved in some grave national emergency—pray Heaven it may not be so—and in that case our failure in these days to meet admitted obligations could not but have a serious deleterious effect upon the national credit then. The precedent set in this one case—although, in our view, limited to this one case—would not be so regarded elsewhere, but would undoubtedly lead to repercussions and to repudiations of one kind or another which would be excused by the example of such a country as Great Britain. It may be convenient for the House of Commons or for the country to ignore this question, but it cannot do so. It must not be like the individual who said, "I look my difficulties firmly in the face and pass on." This matter cannot be left indefinitely unsolved, and I hope that the Government will realise that it is impossible to leave the question in its present situation, liable to sow the seeds of grave difficulty in the future.
The Committee yesterday was, I think, surprised that the Chancellor of the Exchequer had placed his estimated surplus for next year so low. The prospective surplus was very much less than had been almost universally anticipated. Many people engaged in the amiable occupation of counting chickens not yet hatched, certainly expected that when they were hatched they would be far more numerous than those which the Chancellor of the Exchequer has provided. We rather wonder whether he has not yielded to the temptation, for which he has some cause, of putting his estimates as low as possible. The "Times" newspaper on Monday had a leading article which struck a note to which the Budget, when it appeared, apparently responded. It was in conformity with the general lines of that leading article. This is a passage from that very interesting article:
Mr. Baldwin spoke on Saturday of the fight 'two years hence': and, if the next General Election is really two years distant, then Mr. Chamberlain will have two more Budgets to frame. This consideration is not irrelevant to a discussion of the prospects for 1934–36. Mr. Chamberlain is not likely to forget the fate of Chancellors of the Exchequer who in recent times have lavished their blessings early in their career, and have thereafter been faced with disappointment and forced to be disappointing. It may well appear to him preferable to change the severity of the past two Budgets by stages into beneficence, and to found really substantial remissions of taxation upon more sustained buoyancy in the revenue than has so far had time to appear.
That very succinctly and plainly puts the position. What it amounts to is this, that the Chancellor of the Exchequer would be well advised to save up for a popular Budget nearer the General Election.
The other feature which strikes one in the Budget is that its favourable aspect is due, as the Chancellor of the Exchequer said yesterday, in a very large degree, to the reduction in the interest charges upon the Debt. In the April Budget of 1931 interest for the Debt was estimated to need £308,000,000. In the revised Budget of September, 1931, the amount required for that purpose was £289,000,000, and in last year's Budget 1933–34 it was £224,000,000. The right hon. Gentleman has retained the same figure this year. Therefore, between 1931 and now there has been a saving of
£80,000,000 in the interest charged upon the Debt, partly due to the non-payment of the sums that had been agreed to be paid to America, but mainly due to the extreme cheapness of money for Government borrowings. I was rather surprised that the right hon. Gentleman took such unqualified satisfaction in that. It is due not to one cause but to two; First, the restoration of the credit of the Government, which is an essential condition, and, secondly, to the badness of trade. It is a common feature of bad trade that money should be cheap for Government borrowings. The right hon. Gentleman mentioned as a remarkable fact that the Treasury can obtain the use of £100 for a year for the sum of 12s. 6d. That is due to the fact that no one can find any very profitable employment for that £100 in enterprise, whether at home or abroad. That is not a symptom of national health; it is a symptom of sluggish circulation. As soon as trade does really revive and there is a demand for money for the purposes of industry and commerce, and possibly for foreign lending and development in general, then the cheapness of money will disappear and the Budget from that point of view will present far less favourable aspects.
With regard to the allocation of the surplus, there is unanimous approval, I think, of the right hon. Gentleman's action, in the first place, in restoring the cuts to the unemployed. We on these benches urged that course a year ago; we urged it on the benches opposite. I think public opinion in this country is almost unanimously in favour of that course, and if the Government had not taken it there would have been a universal outcry which would have insisted upon that measure being taken at this time. The right hon. Gentleman has put, as he was entitled to put, half the cost on the Insurance Fund, because half of these payments are made out of the Insurance Fund. When that cost, amounting to £4,000,000, has been put on to the Insurance Fund, that is all the more reason for urging what we have repeatedly urged on the Unemployment Bill, that the accumulated debt on the Insurance Fund in these bad times ought not to be charged wholly upon that fund.
I think the right hon. Gentleman is making a great mistake in this Budget—
and this is my first main point of criticism—in using the nett surplus of last year, amounting to £31,000,000, for the general reduction of Debt instead of inviting the House to pass legislation allocating it to the specific reduction of the debt on the Unemployment Fund. That also is a burden upon the nation. Increased contributions have had to be paid by both employers and employed. That is a burden upon industry. It withdraws money from circulation. It lessens the effective demand. The workpeople have less to spend and, consequently, there is, in the long run, less employment. If the Insurance Fund were in a position to restore the contributions of the employers and the employed to what they were before, that would be just as great a relief to the nation as if there had been a reduction of any ordinary form of taxation which comes to the Exchequer.
There is another point. The £31,000,000 going to the Exchequer and being used to pay off, I presume, part of the floating Debt, saves the Exchequer, as the right hon. Gentleman has said, a sum of 12s. 6d. per cent. at the present time—an exceedingly small amount. It is true that later on that sum would have to be increased and therefore the prospective saving would be larger, but at the present time it is very small, nor do I think it probable in the near future that it will be very large. On the other hand, the debt on the Unemployment Fund has to pay 3½ per cent. interest, besides the Sinking Fund. Therefore, from that point of view it would have been better to have included a Clause in the Bill transferring the £31,000,000 to the relief of the Unemployment Fund. That fund would then be in a much better position to meet its obligations in the future than it has been hitherto. I hope that the right hon. Gentleman will consider this proposal—for it is not too late—which would go some little way towards carrying out the specific recommendation of the Royal Commission, which declared that it would not be just to charge the fund with the whole of the debt, and that equity would be served if one-third were left to the fund and two-thirds of the burden were assumed by the Exchequer.
My second point with regard to the unemployed and the Unemployment Fund is that I think opportunity should have been taken to assist the Insurance Fund autho-
rities to remedy some of the very legitimate grievances that arise in connection with the means test. There is no doubt that among the classes affected the means test is in many respects intensely unpopular. It gives rise to resentment, particularly on account of one feature, the requirement that almost the whole of the wages of members of the family who are in work should be thrown into a common pool for the ascertainment of the amount of unemployment allowance to be paid. That is a real grievance among masses of people, and it ought to be remedied. They are right to resent it. A young man or a young woman who is in work and earning wages ought properly to have reserved for him or her a specific sum per week for their own needs, and the remainder should be put into a common pool. This is a grievance that ought to have been remedied before.

Mr. LOGAN: Why did you not say that before?

Mr. J. JONES: You voted for it.

Sir H. SAMUEL: I agree that it ought to have been remedied before. Money is available this year to effect some measure of relief and part of it has been devoted, quite properly, to the restoration of cuts. I think that steps should be taken in the Budget in connection with the Unemployment Bill to remedy the one specific grievance to which I have referred. The right hon. Gentleman is charging £4,000,000 to the Insurance Fund in respect of the restoration of the cuts to the unemployed, and he has raided the Road Fund for another £4,000,000 in order to cover the cost of the very proper concession made with regard to the taxation of motor cars.

Mr. CHAMBERLAIN: How does the right hon. Gentleman make it £4,000,000?

Sir H. SAMUEL: I understood the right hon. Gentleman to say that practically the whole cost of that concession was to come out of the Road Fund. I find in the White Paper that only £200,000 comes out of the Treasury.

Mr. CHAMBERLAIN: Normally, two-thirds of the cost would fall on the Road Fund and only one-third on the Exchequer. The arrangement with the Minister of Transport is that that one-third shall also be borne by the Road Fund.

Sir H. SAMUEL: I am grateful for that correction. A certain sum, at all events, which in other circumstances would have gone to the Road Fund is being withdrawn, and is to be used for the purpose which I mentioned. I think that arrangement is open to some criticism. All the money in the Road Fund is needed for the purpose of the Road Fund. There is an immense amount of work urgently requiring to be done upon the roads. As the Royal Commission appointed by a Conservative Government, under the chairmanship of Sir Arthur Grifuths-Boscawen, reported a few years ago, there is a very large programme of work urgently needed, and this is part of a national development policy to which we on these benches and hon. Members above the Gangway on this side attach the greatest importance. There ought to be a very considerable loan for carrying out these necessary improvements on the roads, which would also make them safer for travellers on the road and pedestrians. In so far as the Road Fund is raided, it makes it the more difficult to carry out that policy. I agree with the hon. Member for Caerphilly (Mr. Morgan Jones) that it is unfortunate that in this Budget no provision is made for a more active policy of national development, particularly in regard to housing.
With regard to the relief of taxation, I do not agree with the hon. Member for Caerphilly in his interpretation of the promise given by the Government in 1931, and in the interchange which took place between the two Front Benches, I do not think he established his position. There never was any promise on the part of the Government of that day that any of the burdens which had been imposed at that time should have precedence of any other. We endeavoured to secure an equitable distribution of sacrifice. I am not sure that we fully succeeded, but that was the principle on which we tried to proceed. When the tendency is reversed, and there is a lessening of burdens instead of the imposition of burdens, precisely the same principle that was adopted when they were imposed should be adopted, and the servants of the State, the unemployed, and the taxpayers who were all called upon to make sacrifices in what we believed was an equitable distribution of the sacrifice, should share the relief. One
exception has been made, and rightly made, and that is that the unemployed should have their cuts restored in full, for there can be no doubt that they have suffered more than others by the measures taken in 1931.
The right hon. Gentleman has made another exception, which I briefly mentioned in the few observations that I made yesterday. He says that he has only enough money, apart from the restoration of the unemployment allowances, to restore one-half of the cuts. However, while he is only restoring half of what was taken away in that respect, the Income Taxpayer is getting back the whole of what was imposed upon him in 1931, or nearly the whole, while those whose allowances were reduced in 1931 are getting nothing in respect of the lessening of the allowances which they enjoyed under the Income Tax Act. It has been stated in the Press that it does not much matter; the right hon. Gentleman had about £20,000,000 to dispense, to give in relief of Income Tax; and he could either have restored the allowances, or he might have given it in an all-round reduction of 6d.; the amount of money is the same, the relief is the same, but given by a different method. That may be so from the Exchequer end, but it is different from the taxpayer's end. Take a man with an income of £500 and three children. Before 1931 he paid £3 in Income Tax. Since 1931 that has been brought up to £15, and the relief which he will now receive is 30s.; that is, the £15 is reduced to £13 10s. A man with an income of £750 paid £24 in Income Tax before 1931. He has paid £58 a year since, and he is now to pay £52. The reduction is not one-half of the extra taxation imposed on these classes of persons, it is one-eighth only in the case of the £500 man and one-sixth in the case of the £700 a year man, while a man with £5,000 a year gets the whole 6d. restored, amounting to £120. The small Income Taxpayer, the lower middle-class, have been left out, in effect, from the remissions of this year, and if it is too late now to review it I consider that they have the first claim for attention next year.
I am sorry that the right hon. Gentleman in dealing with Income Tax has made no attempt to deal with the question of the taxation of company reserves
used for development. I know how difficult and technical the question is, but I hope that the Treasury will not leave it as an insoluble problem but will endeavour to devise some means by which industry can feel that the money it withdraws from its own profits for the purpose of the direct development of factories, mines and workshops will not be mulcted in Income Tax on the way when it is being spent in such development. I express my thanks to the right hon. Gentleman for having mentioned the Exchange Equalisation Account and for giving us information which we have not had before, namely, that it has earned a profit. We are all gratified. We shall also await with great interest the figures which the Financial Secretary has promised of the actual results of the new taxation imposed on co-operative societies, when we shall be able to see whether it was worth while to arouse the great controversy and sense of grievance to which that Measure gave rise. As to the future, the right hon. Gentleman used one very ominous phrase yesterday with regard to what is to happen in the days to come. He forecast an improvement in trade and revenue, and he used these words:
The improvement will come in later, when, as I foresee, I shall be very glad of it in order to"—
The whole Committee expected him to say "relieve the burdens of the population," but instead of that the right hon. Gentleman said:
In order to meet inevitable additions to our expenditure."—[OFFICIAL REPORT, 17th April, 1934, col. 917; Vol. 288.]
That statement was received with feelings of "alarm and despondency". What are these "inevitable additions to our expenditure"? In so far as they may be due to the National Debt they may be inevitable, but if they are intended to be devoted to an increase in armaments, then I believe the country, and other countries, will not forgive their statesmen if by a mishandling of the world's affairs they allow the nations to slip into another competition in armaments, with the result that improvement in trade and growth in revenue, instead of redounding to the relief of the British taxpayer, will be spent in a useless mutual accumulation of weapons of destruction.
Taking the financial situation as a whole, it is obvious that any
real relief can only be achieved through a revival of trade. That is the one method by which revenue can expand, and expenditure be largely reduced through a reduction in the cost of unemployment. It is unemployment which still dominates our national economics and our national finance. There are still the 2,200,000 unemployed, and the Chancellor of the Exchequer in his statement was budgeting on the basis that the 2,200,000 will continue throughout the coming year. The State still has to find £70,000,000 a year for unemployment, a colossal sum which would have appalled our predecessors, in addition to the sums which have to be provided by employers and employed through their contributions. While 2,200,000 is better than a figure of 3,000,000, which we were approaching not long ago, that is no reason why we should not regard it as a grave burden on the nation as well as a source of misery and unhappiness to the 2,000,000 people themselves and their dependants. Let us avoid the danger of becoming accustomed to a figure such as this, and callous. It is a grave and serious matter, and the House and the country cannot be content to accept it as a normal state of things. When the Chancellor of the Exchequer said that all the signs, all the indices of trade and industry, show in every case a definite revival of activity, I think he was putting the facts too high. Representing a cotton constituency, I know that there is no revival in the cotton trade, and Lancashire will feel, once more, that she has been forgotten by the Chancellor of the Exchequer when in pointing to other industries he draws the conclusion that in every case there is a revival of trade.

Mr. CHAMBERLAIN: A revival in the case of every trade I was quoting.

Sir H. SAMUEL: Yes, but why not quote others? My complaint is that the right hon. Gentleman selected indices which supported his statement and did not quote unemployment figures which show that in certain parts of the country there is no revival of activity but extreme depression. The right hon. Gentleman himself gave the reason for it. He said:
On the other hand, our export trade, although it is better than it was, is still far behind the figure at which it stood only a few years ago, not because we are being
beaten out of the field by our competitors, for, on the contrary, as the Committee are aware, we have now regained our place as the first exporting country, but because of the disastrous shrinkage in international trade itself. The channels through which that trade formerly flowed so freely are still blocked.
I thought that I was listening to one of my own speeches. The right hon. Gentleman went on:
and indeed the passage seems to become more difficult as the spirit of economic nationalism continues to spread. We see new obstacles to international trade continually raised."—[OFFICIAL REPORT, 17th April, 1034; col. 906, Vol. 288.]
In Birmingham a few weeks ago he said:
Although trade itself is shrinking to only a shadow of what it was, yet we are obtaining, and even increasing, our proportion of it.
I would rather have a smaller proportion of the substance than a larger proportion of the shadow. It is a remarkable fact that within the last few months the chairmen of all our great banks, almost without exception, in their annual speeches to their shareholders, which always attract a great deal of attention in financial quarters, have emphasised in the most definite terms that there can be no full recovery of national prosperity until there is a re-opening of the channels of international trade. Yet the Government, week after week and month after month, are engaged in choking the channels of international trade as their deliberate policy. The Lord President of the Council, who is a spokesman of the Government, said only a few months ago:
The principle of preserving our own market by restrictions for what we ourselves can produce and do, I believe to be fundamentally a right principle, and you may rely on the Government pursuing it with all their power.
If that is not economic nationalism, what is it? The Minister of Agriculture, in theory and in practice, holds with the utmost vigour and expounds with the greatest energy and ability the full doctrine of complete economic nationalism. The Ottawa Agreements also gave a stimulus to the spirit of economic nationalism in all the different countries of the world. We say it is the fault of others. They say it is our fault. The statesmen and leaders of opinion in Germany and in America, and in various other countries, declare that it is now clear from the Ottawa Agreements that the British Empire is developing a policy
of self sufficiency and of trade within itself, excluding trade from outside, and they say that as a consequence they also must adopt the same policy and restrict as far as possible their own home markets—

Sir ROBERT HORNE: Which of these countries offered us a free market before Ottawa?

Sir H. SAMUEL: The right hon. Gentleman the Chancellor of the Exchequer says that in recent years the spirit of economic nationalism has been intensified and that more and more difficulties are being placed in the way of our trade, and that this is getting progressively worse. What I say is that the Ottawa Agreements, and the whole spirit they embody, have had the effect of stimulating in other countries the tendency to economic nationalism which is bringing the whole world to rain. And the Chancellor of the Exchequer comes to the House of Commons and uses the language which I have just quoted, saying that new obstacles to international trade are continually being raised, as though he were a detached observer seeing what is going on elsewhere, as though he had not himself come to this House and endeavoured to induce it to pass Measure after Measure raising fresh obstacles to international trade; as though he had not indeed devoted his whole political life to preaching the doctrine of economic nationalism, which, as a consequence, we now see in an ever-increasing degree throughout the world. It is really a case of Satan rebuking sin. If hon. Members will turn their minds back to the last election and recall their own speeches—I do not ask them to recall our speeches or the speeches of the Government, let them recall their own speeches—in which they said that if only we had the tariff weapon, then, and then only, would it be possible to get the barriers swept away, and we should be able to force our goods into foreign markets; then, and then only, should we overthrow the barriers which now hinder trade. Three years later we have the Chancellor of the Exchequer, the leader of that movement, making his Budget speech and saying:
Indeed, the passage seems to become more difficult as the spirit of economic nationalism continues to spread. We see new obstacles to international trade continually raised.
Talk of "Great Expectations"—great expectations were raised then and bitterly have they been disappointed. Lastly, with respect to Empire trade. How many perorations have been delivered by hon. Members on the importance of developing Empire trade—eulogies, well-deserved eulogies of the marvellous progress effected by our Dominions and Colonies: emphasis laid on their great and brilliant future; condemnation of all those who refuse to think Imperially; scorn poured on Little Englanders who considered only the trade of this island; emphasis laid on the fact that in these vast territories you had markets for our goods and sources of supply for this country which ought to be developed to the full.
The right hon. Member for Sparkbrook (Mr. Amery) has entered the House at a propitious moment. He has been only one leader among many who have preached the same doctrine. This very day there has been presented to Parliament and to the country a White Paper showing correspondence that has passed between our Government and the Government of New Zealand. New Zealand, one of the most progressive of all the countries of the world, a country with promise of a great future and fervently attached to the British connection—the Government of New Zealand telegraphed as long ago as eight months since to inquire whether, if it gave free or almost free admission into New Zealand for goods of British manufacture, we in return would continue to give free admission to goods of New Zealand production. What was the answer? The answer was very courteous and lengthy and indeed involved, but it can be summed up in a single short word. The answer was "No." That is the substance of that correspondence. We have His Majesty's Government approached by one of the great Dominions asking whether we agree to a real Empire Free Trade between that country and ourselves, and the answer is that we will not.
That is the position to which we have been brought by this intensification of economic nationalism. This is the refusal to think Imperially, and the Chancellor of the Exchequer himself, who with filial piety has carried on with great energy and success the policy which he inherited from his very distinguished father, is a
Member of a Government which, when that Government is approached by one of the Dominions asking for the mutual interchange of goods free from tariffs, has consented to give what is in effect a negative reply. Here is one opportunity that has already arisen. Others may arise in future. I consider that the Government are making a profound mistake in closing the door to this offer and thereby preventing other possible similar offers coming in future. Not until this country accomplishes that which the Government declare in words but do not show in deeds to be their object, namely, to set free the channels of trade between nations, not until commerce is so restored that we get a full increase of revenue such as we might obtain if the country were really prosperous, and thereby a reduction of taxation and the raising of the standard of life of the people, shall we have presented to this House a Budget in which we can take full satisfaction and pride.

5.20 p.m.

Major HILLS: I would like an opportunity to argue with the right hon. Member for Darwen (Sir H. Samuel) on Free Trade and Protection, but there is much to deal with in this Budget, and I must confine myself to one or two observations. The right hon. Gentleman made great fun of the Chancellor's condemnation of economic nationalism, on the ground that we practise it ourselves but dislike others practising it. May I prophesy? I believe that during the present generation and perhaps for two generations the world will live in an era of economic nationalism. I believe it will be just as peaceful and pleasant a world to live in, and far more profitable for this country and for the Empire. I believe it will raise the standard of life and increase the well-being of everyone. I know that the right hon. Member for Darwen does not agree. But we have taken the road of economic nationalism and I believe we shall follow it.
The right hon. Gentleman objected to our answer to New Zealand, our refusal to admit their products free from duty. Let me very respectfully remind him of what he knows, that the principle of economic nationalism is to look after the economics of our own nationals first, and that the principle of Empire unity is just
the same. Our first duty is to the people here, and our next duty is to the people of the Empire. The right hon. Gentleman knows very well that unlimited imports of the kind that he mentioned, even from a Dominion, would spell ruin for the farming industry in this country. That is all I have to say on the subject, except to congratulate the right hon. Gentleman on a very reasoned and constructive criticism of the Budget. I agreed with a great deal of it, although I disagreed with more. I shall not now refer to it because I want to deal with the speech of the hon. Member for Caerphilly (Mr. M. Jones). After starting by saying that there was no surplus at all, that the whole of it was illusory, the hon. Member proceeded to make a very wide use of that surplus, and devoted it to a variety of objects, from decreasing the price of bacon to a large scheme of public works. Apart from that I admit that he did make a serious criticism of the Budget, and I want to answer it as far as I can.
The hon. Member's first complaint was that the unemployed were unfairly treated. After all, they have got back the whole of their cut and are restored to the position in which they were before. The comparative advantage that they get out of the Budget is greater than that gained by others. But my real criticism of the hon. Member's speech is this: When hon. Members opposite talk of unemployment they show great and very real sympathy with the unemployed, but they seem to treat unemployment as static, and as soon as they have explained what they will do for the unemployed, they do not make much contribution as to how the unemployed are to get employment.
The hon. Member for Caerphilly talked about public works. It is perfectly well known that, good as public works may be for some purposes, good as slum clearance schemes may be, public works do not employ a large number of people in comparison with their cost. My second answer to the hon. Member is that the real way to help the unemployed is not to devote one's whole mind to the fact of unemployment, but to try to remove the unemployment, and that I think the Budget has done. Then the hon. Member talked about the increase of indirect as compared with direct taxation. I
agree that there is an increase. But does the hon. Member forget that the direct taxpayer suffered very heavy loss over debt conversion? The taxpaying class is largely the same as the investing class. On the Five per cent. Loan the investors were cut by the amount of £32,000,000 a year. That cut goes on for ever, and no Chancellor of the Exchequer can put it back. So on the whole the indirect taxpayer has come off best.
Perhaps the most serious of all the hon. Member's criticisms was that if 6d. had to come off the Income Tax and £20,000,000 to go to the taxpayer, it ought to go to the poorer taxpayer and ought not to be a flat rate all round. The right hon. Member for Darwen said the same thing. I agree that if you look at it from the point of view of human family need the best use of the £20,000,000 is to restore in part or in whole such things as the children's allowance. Although that would be at a flat rate it would benefit most directly the poorer taxpayer. But what the Chancellor has done has been to try to benefit the country as a whole. He has done that and he has given confidence. He has tried to make enterprise profitable, and he has, quite well I think, induced people to invest money in this country and to employ men, and thereby to get rid of the solid mass of 2,000,000 unemployed which, as the right hon. Member for Darwen said, we look at and look at but which gets smaller very slowly. So in making the 6d. Income Tax reduction a flat rate I believe the Chancellor of the Exchequer was entirely right.
The next point of the hon. Member for Caerphilly was that there was no equality of restoration. That again is the same question. I believe that on the whole there has been equality of restoration, especially if one keeps in mind the heavy cut that the taxpayer and the investor suffered over the reduction of War Loan interest. I believe that the best use has been made of the surplus and that the Chancellor of the Exchequer was quite right. I believe it is a wise Budget. I believe it will be a popular Budget, and that the Chancellor has employed his money in a way that will benefit best the country as a whole. There I entirely approve of all the Chancellor of the Exchequer has done. But I am inclined to share the view expressed by the right
hon. Member for Darwen that the Chancellor has gone rather cautiously in his estimates. Whether the reason that the right hon. Gentleman gave is a true one I cannot say. I am not in the confidence of the National party, and I cannot say whether this Budget is a preparation for a general election two years hence. But as one of the most hopeful of the "wild guessers" who tried to foretell the Budget, I would like very respectfully to ask the Chancellor of the Exchequer questions on certain points.
It may seem rather ridiculous to criticise the estimates of the Chancellor, which are made with all the best skill in the world, carefully sifted and gone through, and on the whole are extraordinarily accurate. But there are certain points about this Budget Estimate which I find it hard to accept and, in these matters, all of us, however un-instructed, have a duty to bring our knowledge, such as it is, into the common stock and tell the Committee what we think. As far as Income Tax is concerned, I do not think any outsider can criticise the estimate of the Inland Revenue and the Treasury which was so extraordinarily accurate last year. These bodies have at their command not only the Government figures but the figures given by employers and altogether they have an authority and a knowledge such as no outsider could bring against them. I confess that I myself put the increase from Income Tax at nearly double what the Chancellor of the Exchequer has estimated and if I sinned in that respect, I sinned in good company because the "Economist", a very cautious and very able journal, put the possible increase as high as £25,000,000 as against the £11,000,000 of the Chancellor of the Exchequer.
There is a further reason beyond those already mentioned why there should be an increase from Income Tax. There is the question of arrears. The great enthusiasm to pay Income Tax which was aroused in 1931 has faded out and I think it will turn out—and I have some grounds for saying this—that the arrears on 5th April last were a great deal more than usual. Whether the Chancellor of the Exchequer will welcome that fact or not I do not know. I do not suppose he will be very sorry. I do not think it will
break his heart to think that his surplus is so much smaller this year if that is leading to a bigger surplus next year. I shall be surprised if it does not appear that there has been a slackening-off in the enthusiasm of the taxpayer to pay, and if that does not react on the accounts of next year.
So much for Income Tax. As to Surtax I agree that there will be a fall and the Chancellor's figures under this heading represent what I myself should expect to be the case. I confess I am in some doubt with regard to the estimate in respect of Death Duties. The Exchequer, it is true, does not get an Eller-man estate every year, but I would ask the Chancellor whether he has allowed enough for the rise in security values which only took place at the end of the last financial year and is going on with increasing velocity? I believe we shall see at the end of the year that receipts from Death Duties, instead of being about £9,000,000 less than the receipts in 1933, will amount to about the same figure. It is not only a question of the actual increase of duty paid on the higher valued securities. Those higher values will also tend to push up estates into the higher levels of duty and, beyond that, they will have a very profitable effect for the Exchequer. I do not think it is unreasonable to expect a larger return than the right hon. Gentleman's Estimate. As the Committee are aware by far the greater part of the property which is assessed for Death Duties consists of investments. The part played by land in this connection is comparatively insignificant. Still, even the price of land is rising also and altogether as I say I should expect a bigger return under this head than is anticipated in the Budget Estimate.
I come now to what seems to me to be a real hope of increased revenue this year. I refer in the first place to the now substantial item of Stamp Duties. This is put at £25,000,000 an increase of about £2,250,000. Does not the Chancellor think that there will be a large increase of speculation and a large number of new enterprises in the City of London and consequently a large addition to the revenue from stamps? I see that the "Times" puts at the head of its City article the words "Industrials in demand" and the "Financial News"
has the caption "Industrials lead the advance." These are British industrials, and, if British industrials are paying well and producing good dividends, we may anticipate the starting of new enterprises. The "Times" states that a number of important industrial issues are known to be contemplated, and I do not think I am unduly optimistic in expecting a very large growth of good sound industrial enterprises in this country all of which would pay Stamp Duty. Of course, they do far more than that. As these enterprises get to work men are got to work, and as men are got to work more wages are available, and the wages are spent on more tea and more sugar and more articles for the household. I do not see the hon. Member for the Sutton Division of Plymouth (Viscountess Astor) in her place at the moment so I may add that it probably also means more beer and perhaps more whisky and more tobacco. That would lead to an increase in the Customs and Excise returns.
I do not think I am wrong in anticipating an increase in the investment of money. I believe there is a feeling of revival and hopefulness in the air and that people will now be ready to come forward to invest money, and I am glad to say I believe that they will invest their money in British enterprises. There are all the signs of such a development, and after all the weary years through which we have passed when almost the only form of investment was investment in foreign undertakings, a boom in home investments will lead to a great deal of employment. In the passage which I have already mentioned the "Times" states that important industrial issues are known to be contemplated for the early summer, and I wish the Exchequer luck. There are other considerations. If there is an increase in' new enterprises and an increase in employment then the cost of transitional payments will go down and perhaps we may see a lessening all round of the contributions to the Insurance Fund.
These probable increases are incalculable in the strictest sense of the word, but I do riot think I am wrong when I say that there are signs on every side of a more hopeful spirit and that people are more inclined to put their money into business. Therefore, I do not think the Chancellor has put his
income quite high enough. Speaking with all respect and with the diffidence which anybody must feel who questions the estimate of so distinguished a Chancellor backed by the competent departments which are behind him, I feel that we shall see a large surplus at the end of the financial year next March. These are some of the more hopeful features which present themselves to me and perhaps it may appear that the wild guessers are not so wild as they may appear at first sight to be.
There is just one more point that I would make. I wish the Chancellor could see his way to take the advice of the right hon. Gentleman the Member for Darwen (Sir H. Samuel) and use his realised surplus to reduce the debt on the Unemployment Fund. I believe that he will find that there is a body of opinion on this side of the House in favour of such a step and that the demand for it will be almost irresistible. If that is so I would impress upon the Financial Secretary to the Treasury that it would be better to do the thing in a generous and a picturesque way. Do not wait to borrow the money but give it now to the Unemployment Fund as has been suggested and you will do it, as I am sure the country wants you to do it, in the right way. If the Chancellor can see his way to do that I believe that his Budget is perfectly fair and that with the extra weight on the side of the social services it is more than fair to the unemployed.

5.40 p.m.

Mr. MABANE: I agree with the right hon. and gallant Gentleman the Member for Ripon (Major Hills) that within the limits of his estimates of expenditure and revenue the Chancellor of the Exchequer has no reason to fear the criticisms of his proposals made by the hon. Member for Caerphilly (Mr. Morgan Jones) and by the right hon. Gentleman the Member for Darwen (Sir H. Samuel). I wish to deal first with one or two points raised by the hon. Member for Caerphilly. I was not clear what he wanted. He claimed first that the surplus did not exist. Then he spoke about distributing an amount far greater than that comprised in the surplus. He referred to the legitimate claims of the direct taxpayer and then complained because those
legitimate claims had been met. I have often found the hon. Member to be unfortunate in his financial calculations. I find him unfortunate again to-day. He said that the second Finance Act of 1931 brought 2,000,000 more people within the scope of the Income Tax. I was able to correct him on the spot as to that point, and I wish now to give the exact figures which are to be found in the report of the Income Tax Commissioners. Only 1,400,000 additional people were made chargeable to tax as a result of the second Finance Act of 1931.
The hon. Member also referred to the relation of indirect to direct taxation. I have heard him make such references before. This afternoon he chose to compare the proportion of direct and indirect taxation for the year 1924–26 with that for the year 1934–35, that is, the year represented by the Estimates now under consideration. The hon. Member said that in 1924–25 the proportion of indirect taxation was 35 per cent. and that it had risen to 43 per cent. in the present Estimates. He is approximately correct but he did not say that if we go back to 1913–14 we find that the proportion of indirect taxation was then 46 per cent. What we are doing is working back to the position which existed before the War and we have not yet reached that position.
I did feel, too, that he was making a point which might be proper to the platform but which is not proper to this House when he asked the Government why they were so cruel to the young. The Chancellor of the Exchequer may present an austere appearance to the world, but I think it belies his true nature. I am satisfied that no one among us is more solicitous for the welfare of the poorest people than the Chancellor of the Exchequer, and, what is more, he can reasonably claim that he is directing his financial policy so that the claims of those who are the poorest among us may be fairly met. Those who are really cruel to the young are the right hon. and hon. Gentlemen who sit on the benches opposite, who, by their reckless finance, caused the cuts to be made in unemployment benefit. I would return the question to those who sit on the Opposition benches: Why are they, by their follies, so cruel to the young?
I would turn for a moment to the speech of the right hon. Member for Darwen.
I refuse to be second to him in my desire to see the development of international trade and the freeing of international trade from all obstacles put upon it, but I would suggest to him that one of the reasons why we got into rather a bad financial condition was because the reduction in international trade made it impossible to collect quite so much taxation. If he will fairly consider our financial situation during the last 2½ years, surely he must be driven, perhaps reluctantly, as many of us who have held views different from those of the great majority in this House for some time past have been driven, to the conclusion that the surplus on the national accounts has been achieved principally result of two infringements of the historic doctrine of Free Trade. The first was the embargo on foreign lending, which was a principal cause of the conditions which made Debt conversion possible. I notice that the hon. Member for Southwark, Central (Mr. Horobin) shakes his head, but I think he will at least agree that the embargo on foreign lending, by making more money available in this country, has been a contributory cause, and thus we have been able to reduce the cost of the National Debt. The second important item which has made this surplus possible is the increased receipts from Customs and Excise, and I would suggest to the right hon. Member for Darwen and those Liberals who follow him that they ought to say where they would get the revenue from if those two infringements of the historic doctrine had not been made, if, that is, we had not been able to convert the Debt and if we had not been able to get this increased revenue from Customs and Excise.
I would refer also to the point made by the right hon. Member for Darwen with regard to the debt on the Unemployment Fund. The right hon. Gentleman said that the floating debt today pays only a very small rate of interest and that the debt of about £106,000,000 on the Unemployment Fund is to pay somewhere about 3½ per cent., and he suggested that that debt could be taken over by the Treasury and a great deal of money thus saved. But surely he is omitting altogether the point that the provisions made for the debt on the Unemployment Fund are funding provisions, and he is comparing the position of a funded debt with that of a floating debt,
and that is an entirely improper thing to do. Again, he suggested that whereas alt Income Taxpayers have received a benefit by the Budget, those who suffered by the alteration in the allowances in 1931 have not received a benefit. Surely that is a fantastic argument.

Mr. HOLDSWORTH: I am sorry my right hon. Friend is not here at the-moment, but he ought not to be misrepresented. He did not say that. He-said that they were not getting the same amount of restitution.

Mr. MABANE: The OFFICIAL REPORT will show which of us is correct. I understood him to say that those who had suffered by reason of the alteration in the allowances received no benefit. It crossed my mind at the time that those-people certainly were Income Taxpayers and that they were getting some benefit, though, I agree, not all that they would desire. I do not think those criticisms, of the right hon. Gentleman have very much substance in them, but I do agree with what has been said by the hon. Member for Caerphilly, the right hon. Member for Darwen, and my right hon. and gallant Friend the Member for-Ripon that if criticisms are to be made of this Budget, they ought to be directed, not to the provisions within the Estimates as they are presented to us, but to the Estimates themselves. I agree with all the previous speakers that this Budget is a Budget of far too great caution. There is an unfortunate heritage of deficit to which the National Government succeeded, and there appears to be a peculiar attitude of mind developing that, while we agree that a deficit is a great demerit, a surplus is a merit. Surely that is not true at all.
The object of the Chancellor in presenting his Budget Estimates is not to-make a kind of profit, but to achieve a balance, and it is surely a breach of all' the historic financial doctrines of this country if we are going to take the attitude that it is the job of the Chancellor of the Exchequer to present Estimates that show a balance when presented, and that result at the end of the year in a large surplus on the national accounts. Surely the historic and immemorial function of Members of this House is to resist attempts on the part of the Crown to obtain from the faithful Commons more supplies than are immediately
necessary, and the only interpretation that can be put upon a surplus of £31,000,000, of £39,000,000, or of £42,000,000, according as you interpret the surplus of last year, is that too much money has been taken out of the pockets of the people of this country. If that can be justified, it must be either on the ground that you think that the Government can spend a man's money better than he can spend it himself, or because you subscribe to the general Socialist doctrine that it is better to take away as much private property as possible and vest it in the State. I do not subscribe to those views.
Therefore, I regret that I cannot congratulate the Chancellor of the Exchequer on achieving his surplus last year. A year ago I thought such a surplus was certainly in prospect. In that belief, I moved a reduction of the Income Tax and urged the restoration of the cuts. I think that if those concessions had then been made, the condition of the country, greatly improved though it is, would have been more improved still, and as I look at the Estimates for this year I cannot but feel that a somewhat similar situation will arise in the current year. I am very glad that the concessions have been made. I have no complaints to make either of the order or of the manner in which they have been made, but I do complain that they do not go far enough. Still more concessions ought to have been made.
It is rather remarkable that on the same basis of revenue and expenditure as last year, the Chancellor of the Exchequer has really budgeted for a decrease in the balance of revenue over expenditure of £13,000,000. For the year just ended the difference between his Budget Estimates and the realisation at the end of the year was £42,000,000. If the basis had remained the same this year, the difference would be £29,000,000, or £13,000,000 worse. That surely is no improvement. I do not believe the result will be anything like so bad. On the contrary, I suggest that on the basis of the present Budget Estimates, there is in prospect now, at the end of the present financial year, a surplus of probably £23,000,000, and possibly a great deal more. That is a very bad thing. That money ought to be in the pockets of the people of this country. Sometimes in
these financial Debates I feel that very few people on the Treasury Bench really have confidence in the National Government. Their pessimism is so intense. I, on the other hand, believe fervently in the success of the policies which the Government are pursuing. I believe that so far they have succeeded beyond expectations and that the end of their success is not yet. If that is so, we ought to expect that the Chancellor of the Exchequer will take no less optimistic a view than his supporters take. If so, why can he not believe that success will come and budget accordingly?
I think the present Budget Estimates are certainly wrong to the following extent: On the expenditure side £10,000,000 too much has been budgeted for, and on the revenue side £13,000,000 too little has been budgeted for. In detail, I cannot understand why the Chancellor estimates that the National Debt will cost £11,000,000 more in the current year than it did last year. Yesterday he gave very few reasons for it. He said that the average rate of interest on the floating debt was 12s. 6d. per cent., but may I point out that at the present amount of the debt—£800,000,000—if that average rate is even doubled in the course of this year, the increase in cost will be only £5,000,000? Most of the rest of the debt is funded, and I cannot see what justification there is for estimating an increase of more than £5,000,000.
Then, with regard to unemployment, you will find in the Financial Statement that there is a sum of £66,000,000 appropriated as the Exchequer grant to the Unemployment Insurance Fund. The Chancellor of the Exchequer yesterday said that 2,200,000 was probably a fair estimate of unemployment for the year. I think I am correct in saying that that grant to the Ministry of Labour of £66,000,000 is based on a figure of unemployment of about 2,500,000. Next, I cannot for the life of me understand why it is that the Chancellor of the Exchequer told the House yesterday that he had £12,000,000 to come as a result of the concessions made last year to the Income Tax payer, and then only added back £11,000,000. He has estimated £240,000,000 for the yield of Income Tax, instead of £241,000,000. I suppose you can say that a million does not matter here or there, but I do not think that should be the
method of finance of this country, and I would like to know why that £12,000,000 has not been added back. I agree in general with the estimates made by my right hon. and gallant Friend the Member for Ripon. I think that Estate Duties and Stamp Duties are likely to yield more, on the evidence of the increase in the value of Stock Exchange securities. I think also that Customs and Excise, as a result of the improvement in trade and industry to be achieved by the National Government in the course of the year, will increase accordingly in yield.
The Chancellor of the Exchequer would have done better for the nation and would have served this House more as the House would wish to be served if he had set out to distribute, not £29,000,000, but £52,000,000, as I believe he could safely have done. I should like to have seen, in addition to the concessions already made, a restoration of all the salary cuts. On the Chancellor's figures, that would cost only another £4,000,000 in the course of the year. I should like to have seen a restoration of some part of the marriage allowances and children's allowances that were reduced in 1931. Perhaps £5,000,000 could have been applied to that. There was, moreover, one addition to taxation made in 1931 that was not mentioned yesterday. That was the addition to the Entertainments Duty. That was definitely one of the additional imposts put on the people in the second Finance Act of 1931, and I should like to have seen the Entertainments Duty altered, and I should best like to have seen a reduction of the duty on the seats up to 6d. in price.
There may be some justification in the view that political tactics demand that there should be something in hand to give away next year, but those considerations ought not to be taken into account, and I should not like to think they had been taken into account by the Government. I should like to feel that this Budget has been so cautious merely because of the psychological effect of the dreadful catastrophe which preceded this Government as a result of the financial policies of the party opposite. I ask the Government to conquer this caution and to believe that the influence of the Labour party is not now an influence which ought to be feared or need be feared in the future in national finance. The National
Government inherited a financial foundation which was rotten, and it has been rebuilt. I am not saying more than a great many Members believe when I say that we wish the Government to set about building eagerly and boldly on this sound foundation of national finance which, as the result of their two-and-half years of splendid effort, has been re-established in this country.

6.1 p.m.

Major NATHAN: I share the view expressed by the right hon. and gallant Gentleman the Member for Ripon (Major Hills) and the hon. Gentleman the Member for Huddersfield (Mr. Mabane) that the Chancellor of the Exchequer has been ultra cautious in his estimate of revenue for the coming year, and I hope before I sit down to state both the grounds of my belief and what, I imagine, must be the Chancellor's reasons and purpose in being ultra cautious. In his solitary literary reference in the Budget yesterday, the Chancellor told us that we had finished the story of "Bleak House" and that we had entered upon the first chapter of "Great Expectations." Is that true? I was rather inclined to think as I heard his speech that he was simply leading us back from "Bleak House" to "The Old Curiosity Shop". For not the least curious of his statements was made when he claimed the acclamation of the Committee for restoring the cuts to the unemployed, but the restoration of those cuts form no part of, and have no place in, the national accounts, and have not, in fact, any proper place in the Budget at all.
It may be, of course, that he claims the support of this Committee, which the Committee willingly gives, to the restoration of those cuts for the reason that he found himself under the compulsion of making provision for the restoration in some part of the transitional payments to those who are subject to the means test. I could have wished that some part of the surplus had been devoted to relaxing and revising the whole principle of the means test. I regret, too, that the Chancellor restored only one-half of the cuts of salaried workers while restoring to the taxpayer the whole of the 6d. put on the standard rate of Income Tax. As I attempt to interpret the Chancellor of the Exchequer's statement
by reference to the reasons which he advanced for his Estimates, both of expenditure and of revenue, I must confess that I am not at all sure than we should not be filled with despondency rather than with hope. For the past three years the Government have framed a series of Budgets which have been instruments for forcing down the British standard of life, in answer to the cry for economy at all costs. Though the Chancellor claimed that the financial situation was filling the business community with hope and confidence, nevertheless the general industrial and economic situation is so stagnant that bank advances, which are as good an index as any other of industrial progress, which were as low as £751,500,000 in March, 1933, had fallen to £738,000,000 a year later. The right hon. Gentleman boasted that the price of Consols is higher than it has been since the War, and that the Government are getting money at 12s. 6d. per cent. According to the "Economist" index, however, wholesale prices are 10 per cent. below the 1913 levels and are almost exactly what they were in January, 1932; while the depressed areas remain as derelict to-day as ever, and employment in the heavy industries is only two-thirds of what is was in the not very prosperous year 1924.
That is one way in which we can look at the present situation, and one finds nothing but despondency if we regard it in that way. There is, of course, another gloss that can be put upon the picture, but no reading of the situation and no gloss can alter the fact that the realised surplus is due, not to flourishing trade and expanding revenue, but to heavier indirect taxation, the deadening effects of which have not been fully felt, to cheap money and low interest rates, and, to the extent of one-third of the surplus, to the death of one very rich man. The fact that the value of Government securities is high and that the Government can borrow extraordinarily cheaply, appears to be a matter of satisfaction to the Chancellor. I suggest that he ought to be alarmed instead of pleased, because it shows that no one but the Government is in a position to use money productively, and the Government will not use it productively. The Chancellor's statement yesterday was
another evidence that the law of diminishing returns is beginning to operate with increasing effect as regards taxation. Every year we take £70,000,000 of £80,000,000 from Death Duties. This year, according to the estimate, we are to take £76,000,000, and we are to spend it as if it were income.
I do not think that the Committee, perhaps, fully realises that every time we do that we are helping to exhaust not only the source of future Death Duties, but the source of future Surtax and Income Tax, more than one-half of which comes from incomes of over £2,000 a year. The fact of the matter is that the sources of Income Tax, Surtax and Death Duties are beginning to dry up. There should be no cause for alarm if action is taken in time, and if the Government wake up to the threatened drought in time, but taking action in time before droughts is not one of the Government's strong points.

Mr. MABANE: Can the hon. and gallant Gentleman gives the evidence on which he bases his statement that Death Duties are drying up, in view of the fact that in 1921–22 they were £52,000,000 and this year £76,000,000? They have been gradually going up.

Major NATHAN: The hon. Gentleman misunderstood me. I did not say that Death Duties were drying up, but I said that the Death Duties were drying up the source from which direct taxation must in future come. It is no use the hon. Gentleman, like so many hon. Members on that side, looking to the past. I am warning them against the future. We cannot be satisfied that we shall be able to continue in future to find taxable income where we found it in the past. It is the first essential for the national economy that we should expand the national income. Otherwise, we shall be caught a second time. Indeed, I think the Chancellor has some inkling of this himself, because he has made a cut of 6d. in Income Tax in order to stimulate industry, as he says. I am not at all sure, however, that a reduction of 6d. in the standard rate is either the best or the most direct method of stimulating industry. It is in some ways a roundabout and wasteful method.
I should have preferred to see the Chancellor use the realised surplus and the prospective surplus for two specific purposes—one as a basis for the service of
a great recovery loan, which would have helped to expand the national income and have shown that the Government themselves were prepared to take an active and positive part in stimulating productivity. In the second place, I should have liked to see it used to help to finance a sweeping change in the treatment of depreciation allowances. I see from the Inland Revenue Commissioners' report just issued that the entire allowance for wear and tear for the whole manufacturing industry of this country—manufacturing, distribution, transport and communications—in 1931–32 was the relatively small sum of £87,000,000. When you consider that one railway, the London Midland and Scottish, has a capital of almost five times that amount, it is obvious that an allowance of £87,000,000 for the whole industry of the country is grossly inadequate. It is a cramping and an obsolete attitude of mind which penalises the enterprise of those who desire to embark on new plant and new capital undertakings. They are penalised in proportion to their enterprise in increasing the productivity of industry.
If you really want to promote industrial activity through private enterprise and to expand our national income and establish an enduring basis on which for the future the Chancellor may surely count, the stimulus to be applied must be applied not merely by the direct action of the State but also by the stimulus to private industry through encouraging it to embark on fresh enterprise and the re-equipment of factories. It would produce a flow of orders, which is precisely what is needed in our heavy industries. It would also enable us more than any other single method to meet the growing and menacing competition of Japan. It would produce better technical equipment and lower costs. It is not, as I need scarcely point out to the Chancellor of the Exchequer, a question of exempting company reserves from taxation that I am discussing. It is the relief from taxation of capital expenditure on re-equipment, which may not at present be charged against revenue. I cannot accept the statement that the 6d. reduction in Income Tax is calculated to stimulate enterprise to the utmost. I think it could better have been done in the way I have indicated. I am not sure, however, whether the objective of the Chancellor of the Exchequer may
not have been a simple desire to make a present to the comfortably-off. But yet, if there was money to spare to relieve the burden of Income Tax, I must confess that I find myself wholeheartedly with my right hon. Friend the Member for Darwen (Sir H. Samuel).
There are now one and a third million more people in this country chargeable to Income Tax than there were before the Budget of 1931. None of those people receive any satisfaction from this Budget at all, except to the most minor extent. A married couple with three children and £500 a year have had their tax increased by 145 per cent., and the Chancellor is not relieving them except to the extent of a few pence. Had the allowances and the exemption limit been put back to the figure at which they stood in 1930, everyone, whether earning £500 or £1,000 or £2,000 a year, would at least have had some relaxation and some benefit from the increase in prosperity. As it is, the wealthiest come off best. There is something in this Budget for the very poor, there is something in this Budget for the very rich, but the great mass of—what shall I call them?—the less comfortably-off are left entirely unhelped by it. The fact that taxation bears so inequitably upon different clasess of the population is partly due not at all to this question of Income Tax but to the burden of indirect taxation. There the poor are paying very much more than the comparatively well-to-do. During the past revenue year, 1933–34, a married couple with three children whose income was only between £100 and £150 paid approximately 11.8 per cent. of the whole of that income in national taxation, while a married couple with three children with £500 a year paid only 7.3 per cent. in national taxation; assuming that in both cases it was earned income. If we add local rates, of course the position becomes very much worse.
Recent Budgets have achieved not only some increases of revenue and reductions of expenditure which, for accounting purposes, make a very pretty sheet of figures, but they have also achieved poverty, hunger and cold for a very large proportion of the population. We have seen the British Budget during the past three years turned into a plan for reducing the British standard of living. What we
hoped to see, this year at all events, was a Budget which would raise the British standard of living, and we have been disappointed. The Chancellor has taken not only an ultra-cautious but I would venture to say, a timid view of the prospects for the future. I agree with the right hon. and gallant Member for Ripon (Major Hills) that it is difficult to accept some of his estimates. In regard to Income Tax he is expecting only the same return as last year. It is true the Chancellor increases his estimate by £12,000,000, but that only replaces the £12,000,000 which, for mechanical reasons, he lost last year. He is basing his estimate for Income Tax for the current year on exactly the same figures as last year, and yet company reports point to some increases in profits, and if he takes into account the company reports published to 31st March, the very day on which the Chancellor's financial year ends, he will be able to reap a great deal of the benefit of the increased profits of the last few months of the revenue year.
But I suspect—and I hope I do him no injustice—that the Chancellor will be quite content when he comes to present his Budget statement next year if an even bigger surplus is realised than during the year now past, for that surplus would be entirely outside the power of the House to deal with, and would go automatically to debt reduction. I do not believe that in these days it is true that capital fructifies in the pockets of the people and I believe the obsession, as I regard it, of the Chancellor of the Exchequer that a surplus should be taken outside the purview of this House and go automatically to the reduction of debt is, having regard to the specific Sinking Funds, a profound economic fallacy. I charge the Chancellor of the Exchequer with having budgeted with a view to a surplus and having in fact created a hidden reserve. I charge him with having budgeted for a surplus which he can use for the purpose of automatic appropriation to the reduction of the National Debt and with the object of taking it outside the control of the House of Commons. If I may respectfully do so I will put this challenge to the Chancellor. If he does not accept my view that he is budgeting for a surplus to be applied automatically to debt reduction will he accept an
Amendment to the Finance Bill he is about to introduce to provide that if contrary to his estimate as placed before the House, a surplus is realised it shall be carried forward into the next Budget and not carried automatically to the reduction of debt unless and until the House of Commons has had an opportunity of expressing an opinion upon if? I would only say this further. In his moving peroration last night he referred, and justly so, to the courage of the British people. I ask him to match that courage by courage on his own part. He has planned so far to cut down the incomes of our people. I ask him so to plan now as to put the people's incomes up.

6.23 p.m.

Sir ARTHUR MICHAEL SAMUEL: The Oracle of Delphi has spoken. I do not know whether the hon. and gallant Member for North-East Bethnal Green (Major Nathan) spoke with his tongue in his cheek or is lacking in a sense of humour. He sits over there, an Independent Liberal, behind the Front Bench of the Socialist party, supporting them in every possible way, voting with them, not trying to get out of the responsibility of being of them. Yet he comes here to tell us that he thinks that if we go on with the policy of heavy Death Duties and high Income Tax and Surtax we shall eventually wreck our sources of taxation. That is the very policy which is held by his leaders; that is the very policy which the hon. and learned Member for East Bristol (Sir S. Cripps) and those who sit with him on that Front Bench are continually advocating. In those circumstances what respect can we have for the argument which the hon. and gallant Member puts up?
I would like to make reference to a point made by my right hon. and gallant Friend the Member for Ripon (Major Hills) and to a statement made by my hon. Friend the Member for Huddersfield (Mr. Mabane). It is to be hoped that my right hon. and gallant Friend the Member for Ripon is right when he says the Chancellor has under-estimated what we are likely to get from Income Tax, but he and I, from our experience at the Treasury, have more reason to believe in what the Treasury experts say than what we think ourselves. Those very able men at the Treasury know pretty well what they are about when
saying what the figures are likely to be. May I remind him of two things? There is a lag in incomes to be assessed, and further, I remember reading only a few days ago a speech by the chairman of the Alliance Trust of Dundee, one of the greatest and oldest Investment Trusts in Scotland or in this country—I do not think there is a larger Investment Trust company in England; possibly the Mercantile and General Trust is, but I cannot say off-hand. The chairman of the Alliance Trust of Dundee predicted that there would be a shrinking of income from their investments in the coming year, and I believe the chairman of the Mercantile and General, if he did not express so strong a view, said he did not look forward to any material increase of income in the current year. These two trust companies are representative companies, long established and holding investments spread over an immense area, with over ten million of British money invested. If the chairmen of those companies tell us that they do not foresee any great rise in income with which they can pay dividends, my right hon. and gallant Friend the Member for Ripon should hesitate before questioning the Income Tax estimate which the Chancellor has made.
The other point I want to make is with regard to a remark made by the hon. Member for Huddersfield. He talked about the embargo on foreign loans. The British public are not in favour of having that embargo on foreign loans lifted, for a very good reason. They have learned something. It is said that if we lend money abroad we create export trade. That may be so. But it does not pay us to do that if we are lending the money to uncredit-worthy borrowers to buy goods which they eventually do not pay for. We have lost hundreds of millions in foreign loans. When I was at the Treasury I made a private estimate of those losses. Between 1868 and the year when I was there—1927—I considered that we had lost in foreign investments not less than £2,000,000,000 and probably £4,000,000,000. Those loans may have created trade, but some of the exports thus sent abroad have been merely gifts to foreigners. I, therefore, leave it to my right hon. Friend the Chancellor of the Exchequer and his advisers not to take off the embargo on foreign loans until they are thoroughly
well convinced that the people to whom we are asked to lend money are likely to repay what they borrow.
I listened very carefully to the speeches of the two leaders on the other side, the leader of the Socialist Opposition and the leader of the Liberal Opposition. The leader of the Socialist Opposition asked for our sympathy, and he was entitled to it, because he had very little to speak about. That was not his fault, and I do not blame him; he did the best he could in difficult circumstances. He was like the character in the Greek play, a brave man struggling with adversity. If he had not had a copy of the "Economist," such as was sent to all of us, I am afraid he would have had very few pegs on which to hang his speech. He cooked up many old points; about the rates of direct and indirect taxation, and brought up again the very aged corpse of the Capital Levy. If we had had a capital levy the mischief done would have been incalculable. A capital levy of £3,000,000,000, as was proposed, would have been deflation of the very worst kind. We now know that deflation reduces values, reduces wholesale prices and other prices. Had we reduced prices as a result of a capital levy of that magnitude, although I am not in the habit of indulging in strong language, I am certain we might have seen riot and even bloodshed in most of our industrial cities in the north, on account of men being thrown out of work by the fall in prices caused by the violent deflation resulting from the capital levy proposed by the Socialist party.
What a proposal resulting in violent deflation here would have meant, if embarked upon, is now to be seen in America. Deflation brings down prices, and is a curse. The people who would have been first hit by a capital levy would have been our own workpeople. The hon. Member for Caerphilly (Mr. M. Jones) made a debating point about the American Debt. I do not think that it was wise for him to say what he did. The right hon. Gentleman the Member for Darwen (Sir H. Samuel) found little to urge against the Budget. What was said by the right hon. Gentleman the Member for Darwen about the American Debt was well founded. When we have the opportunity and the power to settle the American Debt problem I would advocate making a considerable sacrifice
to do everything to put ourselves into the position where no man would be able to say that we had receded one inch from our word of honour. I have had an opportunity of studying the American Debt question for years, and I think that the right hon. Gentleman the Lord President of the Council was perfectly right in what he did. I always resent hostile criticism about what he did in regard to the settlement. He did the best he could in the circumstances. He could not have done otherwise or better.
During the last few weeks, round about Easter, we all watched with hope and anxiety for the final figures that came out to show the national revenue and expenditure. If I may put it in my own words, as though I were on the football field, I would say that when I saw the figures I said, "Thank God. The country has won at last. The country has won through. We have enough to pay our way and make a surplus." Never mind all the party talk now about whether there is a real surplus or not. We have balanced our Budget and made a surplus last year; and we are likely to have a surplus this year, and we cannot want better than that. I do not merely congratulate the Chancellor; I thank him for his having done that. He has resisted all suggestions for jazz financial devices. He has kept away from new deals.
I will leave other hon. Members to deal with the various novel and courageous failures of Mr. Roosevelt. Hon. Members have probably read in the "Times" this morning what Mr. Roosevelt is having to throw over in the way of legislation proposals. The Americans have got into the way of thinking that sixpence is a shilling and as my hon. Friend the Member for East Aberdeen (Mr. Boothby) would say, they say that the sixpenny-shilling is "controlled inflation." The Chancellor is entitled to the gratitude of hon. Members for the resolute way in which he resisted last year the suggestion that we should have a Prosperity Budget, increase purchasing power by reducing the Income Tax and stimulate trade and the Revenue. He was urged to budget for three years and disregard a deficit in the hope of a surplus at the end. Some of us who went through the unpleasant sensation of watching Labour finance under Lord Snowden, between the years 1929 and 1931, were determined not to carry
on Mr. Snowden's disastrous policy; we went to the country on the policy of balancing our Budgets. This Parliament was elected to balance Budgets. The Chancellor of the Exchequer brought in an honest Budget which has created confidence and a wholesome revival as reflected in the Revenue.
Had the Chancellor been persuaded to adopt the three-year scheme, the advocates of it would have ascribed our surplus to-day to their scheme. That ascription would have been quite wrong. Their scheme would have concealed the true state of affairs about which we now know and would have provided an excuse in future years for following some other sort of jazz policy which we now know would have been vastly inferior to the honest methods which the Chancellor and the Government have pursued. I do not think that enough credit has been given to the Chancellor for the way in which he has handled his £31,000,000 of surplus. He has resolutely refused to deviate from honest finance, he has done what every man must know is the right thing—he has paid off debt. No man or nation has ever been ruined by paying off debt. In the long run we shall find that that will confer a great advantage upon us. In a trading country like ours, the best policy is always to maintain the old, rigid, orthodox system of clean finance; pay your way, do not get into debt, but when you do, pay it off as soon as possible.
I was glad to hear the Chancellor of the Exchequer say, especially as I took some part in the Debate upon the Exchange Equalisation Fund, that the public purse, in relation to that fund, had suffered no loss, but had, in fact, made a profit. That there has been no loss, but has been a profit in spite of the exchange oscillations during the past year, entitles those who have handled the fund to our admiration. Hon Members who have studied exchange will know what I mean when I say that exchange problems almost drive us mad. I remember a passage in Homer which I learned when I was a boy from Book VI of the Iliad, where Diomed exchanges his copper armour with Glaucus, whose armour was of gold. The passage is:

[HON. MEMBERS: "Translate."] Gold for copper in the ratio of 100 oxen to
nine oxen. Homer goes on to point out that Zeus had first driven one of those men mad before they engaged upon the exchange. I rather think that that holds good now. After discussions upon foreign exchanges I sometimes wonder whether we are left quite sane. In the transactions with the Exchange Equalisation Fund so far from there being a loss after handling the immense sum, and in spite of the frightful variations of the exchanges, we have come out without any loss, which makes those who have worked the fund entitled to our thanks.

A complaint was made from the other side of the House by the hon. Member for Limehouse (Mr. Attlee), who spoke rather slightingly of the "rentier" who holds the National Debt. It has been explained here before that the rentier does not hold the National Debt exclusively. It is held by comparatively poor people. That fact was worked out and shown here two or three years ago. There is, roughly, £7,000,000,000 of internal Debt and the cost of the service last year was £213,000,000, at an average rate as low as 3 per cent. on the whole nominal amount. When you have taken off 5s. in the £, the cost is about 2¼ per cent., which is less than the interest given to the Post Office depositors. When Income Tax and Surtax have both been taken off, the amount which the rentier gets is not very great. It is thus not very reasonable to make attacks upon those who have lent their money and their savings for national purposes. There was another attack by the hon. Member for Limehouse which I cut out of the OFFICIAL REPORT this morning, in which he said:
The poorer members of the community even among Income Tax payers are being put aside for the claims of the rentier class. It is a shifting of taxation from the direct taxpayer to the indirect taxpayer. The proportions are being altered against the indirect taxpayer, against the consumer, year after year, and even when dealing with Income Tax the right hon. Gentleman continues to inflict the greatest burden on the poorest."—[OFFICIAL REPORT, 17th April, 1934: col. 929, Vol. 288.]

The hon. Gentleman and the country ought to look at page 19 of the Financial Statement, No. 67, which was issued yesterday. He will find that the Income Tax payer alone, without Surtax, pays the whole interest on the National Debt. The direct taxpayer therefore has no need to thank anyone for his interest received
on the National Debt, because he provides it himself. Those who pay no direct taxation have also the advantage that the cost of the management and the interest on the National Debt and the whole of the charges for health, labour, insurance and old age and widows' pensions, are entirely paid by the direct taxpayer, without any contribution from the indirect taxpayer or from those who do not pay Income Tax, Surtax, Estate Duties or Stamp Duties. The direct taxpayer contributes his full share of the national taxation—full measure and running over—and he bears his burden manfully. I do not think that he has been favoured by the 6d. relief. If hon. Members will look at page 19 of the Financial Statement they will see the immense sum the direct taxpayer pays, and how far the money goes. The greater burden of taxation is borne by the Income Tax payer section of the country, and we ought to speak well of them.

The Chancellor decided upon a sixpenny reduction of Income Tax which was welcome. It is something, although relatively not very much. He talked about the psychological effect; I am getting very tired of psychological effects, because they do not fill factories. They have a major effect upon the Stock Exchange and a minor effect upon the factory. I know that the Chancellor of the Exchequer does what he can, and that if he has no more to give, he cannot give it. If he had given more, there would have been an outcry from the other side. Let us look at this sixpenny reduction on the Income Tax, which I welcome, and for which I thank him. The Committee will understand that I speak as an old manufacturer, from the point of view of a man running his own business. Such a man would not dream of taking further risks, with Income Tax, Surtax and Death Duties at the level they are at present. Most of the profit is taken away from him if he is successful, and he has himself to bear any loss on the risk which he takes in putting further money in. The great proportion of it is taken by the State if he succeeds, and if he loses, he gets nothing back.

The full revival of industry, requiring pluck and ability, will only come—I do not say this facetiously—when Income Tax is reduced to 2s. 6d. in the £—and that cannot be done yet—or alternatively when direct taxation generally is so
adjusted that a man need not risk losing his savings and then surrender the major portion of his profits earned in the exercise of his own pluck and skill. When the Chancellor of the Exchequer gives the major portion of his surplus to the Income Tax payer for the extension of his business he will do very much more wisely than the other side think.

Nothing was said by the Chancellor of the Exchequer about the floating debt. There ought to be a straightening out of the floating debt position. The amount now outstanding, according to the Financial Statement, is roughly £845,000,000, and that figure includes Ways and Means Advances. It will be seen from page 5 of the Financial Statement that Treasury Bills account for over £799,000,000—that is, nearly £800,000,000—and Ways and Means Advances for about £45,000,000;that makes the total £845,000,000. I am sure that in those sums there is a considerable amount held by the Exchange Equalisation Fund, which amounts to £375,000,000—I do not know the figures and I am not trying to find out; I am merely using them as an illustration of my argument. I should think, out of £845,000,000 of floating debt, probably about £250,000,000 of Treasury Bills are held by the Exchange Equalisation Fund and £125,000,000 of the Exchange Fund is probably in the form of gold and foreign exchange. Then, I should think, it may be that the Government Departments hold another £100,000,000—the Paymaster-General, the Public Trustee, the Post Office, the Road Fund and the High Court.

Let us see how that works out. I have mentally put down £250,000,000 as held by the Exchange Equalisation Fund, and £100,000,000 as held by Government Departments. That, therefore, would leave about £500,000,000 of this floating debt still in the hands of the public and the banks. These bills are for the most part three-months bills, and there may be a temptation to the Treasury to continue to leave this £500,000,000 in the form of Treasury bills because the interest is very low—the Chancellor of the Exchequer told us yesterday that it averaged about 12s. 6d. per cent. a year. That, of course, must be set against the present interest rate of something like 3 per cent. on longer-dated Government loans held by the public. But we have
£500,000,000 of floating debt in the hands of the British banks and public, and some of the non-British holders are not our best friends. Some of it may be in the hands of banks of foreign countries, and thus may constitute a vulnerable and even a dangerous factor in our monetary position.

The mere threat of an economic or political upset abroad would at once put up the cost of money in this country, and in that case, if there were anything of a fright, and foreigners asked to have back the money that they held in Treasury bills here, we might find difficulty in refunding in a long-dated loan the amount that would be required to replace what we should have to pay out to the foreigner. I do not say that there would be any great difficulty, but certainly it would be much dearer in interest than it would be in times of profound tranquillity. I think it would be found on balance, in the long run, not to involve a very much larger interest cost if, now that long-dated loans can be floated at very cheap rates of interest, we made up our minds during the next 12 months to put, say, £250,000,000—I do not want to dogmatise about the amount—into a stock to suit the Treasury policy, and at the same time tempt the public to take it as a long-dated investment. That is my main reason for wishing to speak in the Debate to-night. I think that this amount of £500,000,000 of Treasury bills is too much to have in the hands of the public and the banks. It might be found that the money market, and even the banks, would object to a refunding, but I am not inclined to pay too much attention to that. I am more inclined to agree that the Government should be tempted to bear the higher interest for a few years in order to reduce this amount of Treasury bills by funding. It was never intended, however, by Walter Bagehot, who introduced the idea of the three-months' Treasury bill, that these bills should be bolt-holes for unenterprising bankers, or places of safety in which foreigners could place their money. That is not their purpose. Care must be taken that they do not create a weakness. Treasury bills should not be regarded as places of refuge for foreign banks.

We are often told that the banks would like to see a larger volume of comer-
cial bills used in home trade. As I ventured to say just now, I have been in trade myself, and in the old days customers would accept bills, but nowadays customers, especially retail shopkeepers, regard with dislike the acceptance of what is known as a commercial bill; they consider that their credit is involved if they do so. They make a great mistake. If they are called upon by a wholesale house to give a bill for the amount of their debt, they should give it, because it enables money to be raised much more cheaply than would otherwise be the case, and reduces cost of production. A banker will always lend money more cheaply on a commercial bill with a good customer's name on it than he would lend money to that same customer as a loan for accommodation purposes. Money dealers and banks have used these three-months Treasury bills as a substitute for commercial bills. The War taught them easy profits in Treasury bills. They are grumbling about the scarcity of commercial bills, as we are told at meetings of chambers of commerce; but they will not be inclined to bestir themselves to use their energies to get the public to make greater use of commercial bills until the prick of necessity arrives, through a reduction in the amount of Treasury bills available. There is no shortage of cash in the banks; there is no shortage of bank deposits; there is no shortage of accommodation. Credit could not be more abundant than it is now. Indeed, to quote an expression which has already been used, the banks are bulging with money. They could not be more willing than they are now to lend to people who are willing to borrow and are credit-worthy, and credit could not be much cheaper. It does not appear to me, therefore, that a reduction of this very dangerous amount of £500,000,000 of floating debt would in any way impede trade recovery, though I do not say that it might not have an effect on Stock Exchange booms.

But I have no sympathy with increased lending for the purpose of assisting Stock Exchange gambling. A large number of people appear to think that banks and credit exist for the purpose of financing speculative paper or even sound investment paper. But that is not their first purpose. Their first purpose is to in-
crease the basic trades and the industry of the country, and Stock Exchange expansion is merely in the third rank. We are under no obligation in any event to furnish Treasury bills for foreign banks who cannot lend their money safely abroad. It would be well that the banks should bestir themselves vigorously and try to increase the use of commercial bills here. Therefore, I think it would be safer on balance, and in the long run would be prudent and beneficial, even if for a few years it cost us more in interest, till money became dearer by trade revival, to reduce the amount of the floating Debt. This matter is about due for attention by the Treasury and at an early opportunity, at least in my view. Perhaps the Chancellor of the Exchequer might like to say a word, when he replies, as to what we should do with this very unpleasant and very vulnerable amount of £500,000,000 of short-dated Treasury bills now in the hands of the public and the banks.

6.54 p.m.

Mr. JOHN WILMOT: I have listened with very great interest to the speech of the hon. Member for Farnham (Sir A. M. Samuel), and must confess to being somewhat tempted to follow him along some of the paths which he has opened up, especially one which seemed to me to lead in two opposite directions—on the one hand to a condemnation of any proposal to reduce the debt, and, on the other, to approval of the action which the Chancellor of the Exchequer is taking, in accordance with the law, in devoting the realised surplus to the reduction of debt. I must say that, from my point of view, I would prefer to see some alteration in the normal course of things, having regard to the entirely abnormal circumstances in which we are. The application of the realised surplus to the reduction of debt is itself a deflationary action, and I would submit with every respect that the need to-day is not so much the reduction of debt as the expansion of enterprise. In my view, it would have been better, having regard to the very exceptional circumstances, if the realised surplus had been applied to the expansion of enterprise designed to put to work those who are unemployed, on work of national importance which is waiting to be done and by the doing of which the whole country would reap
enormous advantage and receive back in the long run increased revenue.
I do not wish to weary the House, and, therefore, I will confine myself to one aspect of the Chancellor's statement, which seems to me to be of great importance to a large number of people, and I hope the Committee will be induced to agree in a large measure with the point of view that I seek to put forward. When I listened to the Chancellor's statement—and it was the first Budget speech that I have heard as 'a Member of the House—I was struck, if I may say so, by the clear and masterly manner in which this complicated subject was presented; and, when I heard the Chancellor quote a dictum of Lord Snowden as a principle upon which he was going to act—when he said that:
A surplus now must in justice be devoted, as far as it will allow, to relieving those classes who suffered when the crisis was acute."—[OFFICIAL REPORT, 17th April, 1934; col. 921, Vol. 288.]
I felt that justice was about to be done. But, as I listened to the Chancellor's proposals for disposing of the surplus, I felt that that principle had been gravely departed from, because, surely, if we accept the principle that the surplus should be devoted to relieving those classes who suffered, we must also agree that the relief of the suffering should be in proportion to the severity of the suffering, and, if we look at the severity of the suffering, we have to have regard to the proportion of the family income which was taken away in 1931. We all agree that the first claim on the surplus, having regard to that principle, was the claim of the unemployed, and we were all glad to hear that the unemployment benefits were to be restored. But when it turns out that the major portion of the cost of restoring those benefits is going to be borne indirectly by the unemployed themselves, I should have thought that the Chancellor would have made a contribution to the relief of the sufferings of the unemployed by undertaking a large portion, at any rate, of the repayment of the debt on the fund.
Leaving that question for the moment, I come to the major purpose to which the Chancellor has applied his surplus, namely, a reduction of the Income Tax. I fail to understand why, having decided to restore the sacrifices made by the
Income Tax payer, he should have deliberately decided to reduce the standard rate rather than to restore the allowances. I have no exact figures as to the cost to the Treasury of restoring the allowances to the pre-1931 level, but I believe I am right in saying that it would have been considerably less than the cost of reducing the standard rate by 6d. in the £. I would ask the Committee to bear with me for a few moments while I point out the extraordinary difference in effect between these two proposals. The reduction in the standard rate has had the effect of giving the major benefit to the richest people. It gives back to the rich Income Tax payer nearly all the sacrifice which he made in 1931, while the salaried workers—the teachers and others—who suffered cuts in 1931 are to get restoration only as to 50 per cent. The Income Tax payer is going to receive 100 per cent. restitution if he is rich enough, but the poorer he is—and there are large numbers of very poor people paying Income Tax to-day—the smaller the proportion of his sacrifice that will be restored. If that is so—and I shall seek to show that it is—it is an extraordinary decision for the Chancellor to have reached: to have had £29,000,000 of money to distribute, to have chosen to use £21,000,000 for the relief of Income Tax, and to have used it in a manner in which the rich benefit and the poor do not.

Mr. DAVID MASON: Surely the hon. Member will admit, in fairness to the Chancellor, that the proposal is a stimulus to trade?

Mr. WILMOT: I am very glad that the hon. Gentleman raised that point, because it is another point which I was going to use in my argument. I remember that the Chancellor said in his statement that he had to have regard not only to the effect of the tax remission on the individual, but also to the effect of his proposal on the country as a whole. I agree that he has to have regard to those two factors, but I submit, with all respect, that a tax remission in inverse proportion to what has been done—a tax remission the major proportion of which goes to the poorest class of taxpayer—will have a much better effect on the country as a whole than tax remission to the richest class in the country.
Leaving altogether aside the humanities of the question, from a purely economic point of view—I see that the hon. Member shakes his head; will he do me the honour of following me for one moment?—a remission of tax to the richer classes—and the great bulk of this £29,000,000 is going to the richer classes—means that money which has been previously used for Government expenditure becomes available for private expenditure. If it becomes available in the pocket of a poor family, it is used immediately over the shop counter to buy the necessities and little luxuries of life. If, however, it becomes available for the well-to-do and the wealthy family, whose necessities and luxuries are already provided for, then that remission of taxation goes to swell the margin of income available for investment. I ask the hon. Member to follow me one step further, since he agrees with me so far. This country is not suffering from lack of investable capital; it is suffering from a lack of consuming power and buying power, and if our national aggregate buying capacity were equal to our aggregate producing capacity, then we should be a happy and a prosperous nation. It is surely the lack of equilibrium between our capacity to invest and produce and our capacity to buy and consume which is largely the cause of our present trouble. Therefore, to go back to the point which I left when the hon. Gentleman was so good as to make his point, the effect of the Chancellor choosing to distribute his bounty to the richest classes of the community is not only unjust as between one set of individuals and another, but it is not in the best interests of the country as a whole, which was one of the criteria which the Chancellor himself laid down.
Now let us look at the actual details of the effect of this proposal. I venture to submit to the Committee that they are not only remarkable; they are startling. Let us take three classes of people—the single person, the married person, and the family. The small Income Tax payer—the £4 a week man, the single man who in 1930, before the Emergency Budget, paid only £3 4s. in Income Tax—had his Income Tax bill increased by the Emergency Budget of 1931 from £3 4s. to £7 10s.—more than double. Of that increase of £4 6s:, only 15s. was due to
the alteration of the standard rates; £3 11s. was due to the withdrawal of the allowances. All that that man gets out of this surplus is a return, a restoration, a relief of 15s., out of a total sacrifice of £4 6s. Now let us take the £2,000 a year single man. What happens to him? Is there equality of restitution? There was certainly no equality of sacrifice. In 1930 the £2,000 a year man paid £332 Income Tax. That tax was raised to £378; not double, as in the case of the £200 a year man, but only by £46 on an income of £2,000. The remarkable thing is not so much the inequity of the sacrifice which was called for, but the double inequity of the restoration of the sacrifice. Of this £46 extra tax which the £2,000 a year man was called upon to pay, £37 16s. 3d. was due to the alteration of the standard rate, and only £8 6s. 9d. to the withdrawal of allowances. See, therefore, where we arrive. The £200 a year man has restored to him 15s. out of £4 6s., but the £2,000 a year man, in precisely the same circumstances, gets £37 16s. 3d, out of £46.
Surely that is a startling case, but when we leave the single people and turn to the married people the contrast becomes even more dramatic. Let us take, for instance, a family—I hesitate to weary the Committee with too many figures, but I think that this is important, because it affects one of the most hard-hit sections of the community—a married man with one child, earning £500 a year. This class of people is not the very poor, but I often hear it described by hon. Gentlemen opposite, and in the newspapers with whose views they concur, as the backbone of the country. I am not disposed to quarrel with that description. In 1931 that family made this contribution to a crisis which was said to be existing: from £13 4s. annual Income Tax that family's tax was raised to £28 2s. 6d., an increase of £14 18s. 6d.—more than double. Of that increase—and this is a really startling figure—only £2 16s. 3d. was due to the alteration of the standard rate; £12 2s. 3d. was due to withdrawal of allowances—earned income allowance, marriage allowance and children's allowance. What happens to that family? Such families have in the main already suffered heavy reductions in income and heavy increases in expenses. That family, out of its £14 18s. 6d,
increase in taxation, will get out of this surplus only £2 16s. 3d., and will be left to bear an additional tax of £12 2s. 3d. out of the total addition of £14 18s. 6d.
On the other hand, a fortunate family whose breadwinner earns £2,000 a year is four times as well off and has that comfortable margin in which taxation becomes relatively much less important. It will, nevertheless be immeasurably better treated than its unfortunate neighbours with £500. The £2,000 a year man, married with one child, is not hard up; he can afford to carry his share of the contribution to national prosperity even now. His extra taxation in 1931 was £55 15s.; he was only put up from £298 to £353. Of that £55, £35 is to be given back to him, and he is left with an extra taxation of only £20. You see, therefore, the comparison: the £500 a year family gets back £2 out of £14; the £2,000 a year family gets back £35 out of £55.
I have sought to show that as regards single men and women, as regards married people with one child, the effects of the Chancellor's proposals are the very negation of the principle which he laid down as his guiding star. But when one comes to the ordinary normal English family, the married man with three children, I am sure that the Committee will be little short of horrified to realise that not only has the Chancellor treated the rich better than the poor, but he has treated the single better than the married, and the married better than the family. Take the case of the £500 a year family with three children to support. Their tax was increased—and I ask the Committee to note this figure—in 1931 from £3 4s. to £15, and all they are to get back out of that increase of nearly. £5 is a paltry 30s. a year. But the £2,000 a year family, which was only increased in taxation from £275 to £333, an increase of £57, will get back £33. While the £500 a year family gets back only 30s. of the £11, the £2,000 family gets back £33 out of £57. I have not bothered the Committee with the percentages involved. I am inclined to distrust percentages. But the figures and instances speak for themselves and demonstrate as nothing else could what I describe as the gross inequalities and
injustice in the application of this surplus.
I hope the Chancellor will explain why he took the extraordinary decision of giving this surplus not on the principle which he enunciated at the opening of his speech but on the principle of "To him that hath shall be given." This seems to me an extremely serious thing and one which will cause the utmost dissatisfaction, unrest and resentment among a class of people who have to my mind a very strong claim to the consideration of the House. The poverty, the difficulties, the worries, the anxieties and privations endured by the black-coated respectable poor are not a dramatic thing which is paraded very much, but stark poverty is there behind respectable doors, and these are the people who have been singled out by the Chancellor to get the most meagre share of the bounty that was going.
In considering these income limits, and in considering the margins that there are to meet this taxation, we must have regard to the circumstances of these classes of people. The 200 a year family have to provide a somewhat superior appearance. It is all very well in works of fiction to treat the respectable poor as an object of jest. I regard that kind of poverty as among the most pitiable and the most tragic in the whole community. These people have to provide against old age, which comes upon them at a greater speed in times of adversity, and the age at which this class of man is able to find employment becomes younger and younger, and the time is rapidly approaching when the clerk, the shop assistant and the commercial traveller cannot find employment if he is over 40 or 45. That is the tragedy that is hanging like a black cloud over this particular family that is called upon to continue sacrifices of this kind, and the very existence of that cloud means that out of these paltry incomes something has to be scraped and put aside to provide for the old age which, it seems to me, it is a travesty to regard as old age, but which is old age in the sense that no income can be further earned. These are the people who seek by every kind of sacrifice to give their children the best education and the best possible chance in life. They are the people who are the most hesitant to come to the State for assistance in their troubles, yet
they are the people whom the Chancellor in his wisdom has singled out to continue to stagger under a heavier burden of sacrifice than any other class in the community.

7.21 p.m.

Mr. AMERY: I can assure the hon. Member that in the eloquent appeal that he has made for the small man he is in a large measure pushing an open door, because we all share the concern which he feels for a class which throughout our financial legislation for a generation and more past has had less consideration than it deserves. I think, however, that at this moment what concerns us most is the actual economic effect of our Measures on the industrial situation of the country. Even as regards that I feel that there is a certain force in the arguments that the hon. Member has put forward, that any concession given to the small Income Tax payer will go direct into expenditure on goods and services and thereby contribute that stimulation to demand which is so vital, whereas it may be argued that the reduction in the standard rate will, at any rate in some part, go not so much towards immediate expenditure as towards investment at a time when there is more than enough money waiting for investment and not seeing where to find a profit. I fully admit the force of that argument. There is, however, another, which I have no doubt has weighed very strongly with the Chancellor of the Exchequer, and that is simply that the psychological effect of announcing the reduction of 6d. may have more influence in encouraging confidence in industry than what would in itself be just as good a step towards promoting industrial recovery. Therefore, knowing the considerations that the Chancellor has had to balance, I am not prepared to quarrel with him because, on considering the matter in all its aspects he came down on the side of the more dramatic proposal which he believed would create a greater effect in the country and give a greater confidence to industry.
In any case, I should like to congratulate him, as Chancellor of the Exchequer, on having drafted an excellent Budget, in so far as it is possible to produce a Budget which can meet our present needs on conventional Treasury lines and subject to Treasury standards of "sound finance". He has, I think, divided his
concessions fairly evenly, and I should like, in particular, in respect of one concession, to offer him my sincere congratulations, and that is the reduction in the horse-power tax. My experience in travelling round the British Empire in recent years is that there is no more serious obstacle to the export trade in British motor cars than the fact that our domestic taxation creates a type of car which is unfit to cope with the rough roads of the countries overseas. For every mile of good road in Australia, South Africa, East Africa, Canada, or foreign countries like Sweden and the Argentine, there are at least 100 miles of bad, and people who have to drive over bad roads, through deep sand and mud and up and down steep places, will not have patience with a car which has not the horse-power to pull them through. I believe that this long delayed reform—I have been urging it strenuously for a good many years past—will have a very useful effect in helping the motor car industry.
I am sure the Chancellor will forgive me if, instead of continuing with the praise which I should gladly and rightly have conceded to those features of the Budget with which I most agree, I turn to a rather different question. I find in the Budget a very excellent Treasury policy for dealing with the figures of expenditure and revenue as supplied by the Treasury, but I do not find a Government policy for using our finance as an instrument for coping with the terribly serious economic crisis with which we are confronted. It is on the question of what we are to do to help the situation, that I find so little clear lead or encouragement in the Budget speech. At the very opening of his speech the Chancellor stated—and he noted it as a matter of satisfaction—that there was a small but distinct rise in wholesale prices. The Government have said more than once that they regard the terrible fall in wholesale prices as the main cause of the world depression and the main evil that we have to combat. Ever since the Macmillan Report we have been confronted with that. But I find nothing from beginning to end of the Budget that suggests any steps which would help to raise wholesale prices. On the contrary, I see in it more than one proposal for bringing down the level of wholesale prices and for continuing to contribute to the present depression.
Let me deal first of all with the realised surplus. Those of us who last year urged a bolder policy in respect of Income Tax are now justified by the facts. There has been a surplus realised which would have enabled every one of the concessions made this year to be made last year. It may be said that the surplus is in part due to one substantial windfall. But would not a reduction of taxation and the other concessions have created its own favourable wind, which would have contributed to the revenue from various other sources quite as much as has been secured from the Death Duties on the estate of the late Sir John Ellerman? Indeed, if one may take an individual instance where some of us continuously urged a bolder course and used arguments which have been justified when the bolder course was adopted, I have only to refer to the Beer Duty. The Chancellor of the Exchequer very rightly laid stress upon the success of that effort. I think that he might almost have added a word, I will not say of apology, but at any rate of appreciation of those who urged that step upon him a year before he took it. He should face the whole situation, not with timidity but with boldness, because boldness improves the situation and timidity throws it back. At any rate, we have been, as it happens, overtaxed by more than £30,000,000 during last year, and the produce of that over taxation is to be given, not to help the industrial situation, but to the Sinking Fund; to contribute to that general process of deflation which has brought about all our troubles. It may reduce by a certain amount the annual interest on our debt burden, but by the very process of deflation it tends to increase the burden represented in terms of goods and services. All that we have done since the War in order to reduce our debt has practically doubled the burden of our debt in terms of wholesale prices.
In that connection, I should like to urge upon the Chancellor of the Exchequer most respectfully and earnestly at any rate the alternative solution recommended by my right hon. Friend the Member for Ripon (Major Hills). If this realised surplus were devoted to reducing the debt upon the Unemployment Fund, it would make possible not only an increase of benefits, but, what I think even more important in the present situa-
tion, an earlier reduction of those heavy taxes—which are taxes none the less though they are not called taxes—which employers and employed have to pay to-day for insurance. In so far as that heavy burden—a burden imposed not in proportion to profits but in proportion to men employed—is taken off the industrial employer, it will help the progress of industry; and in so far as it is taken off the workman, it will add to his consuming power. In either case you will get a contribution towards the general expansion of industry and general recovery very different from the effect of putting this surplus into the Sinking Fund. I should like the Chancellor of the Exchequer, not only to accept the appeal made to him to put the realised surplus into the reduction of the debt on the Unemployment Fund, but also to promise, if there is a realised surplus at the end of this financial year—and I cannot help feeling, unless some very heavy unforeseen demands are made, that there will be a very large surplus resulting from his excessively cautious budgeting—to add that amount also to the reduction of the Unemployment Fund debt in order to reduce the heavy burdens which are now being borne both by employer and employed in industry and which are taxes which militate considerably against recovery.
Let me turn to another statement in the opening sentences of the speech of my right hon. Friend. He pointed out that the improvement in the country is almost entirely due to the expansion of the home market and to the greater part of that market which has been secured by our own people. He went on from that to refer, in terms of sorrow perhaps rather than of anger, to the economic nationalism of other countries. We really cannot have it altogether both ways. Economic nationalism has come to stay in the world. We have been rather slow in taking it up. But in the present situation, what matters is that if we are to have economic nationalism, let us be as efficient in our economic nationalism as possible. It is a rather striking fact that while the intensive economic nationalism of other countries has led to a very considerable diminution in the volume of world trade, it has had the intended and desired effect in their own countries. After a period of dislocation and difficulty, you will find in
almost every continental country a very great increase in the volume of production and of employment in the home market. It is true that, if we compare the figures of to-day with the figures of 1929, we are better relatively than any other of our great competitors. We have had an advantage which we had not in 1929; but, if you take the figures of the last 12 months, there is hardly one of the countries on the Continent, and of course America, whose increasd production and employment is not proportionately much higher than our own. I suggest that the reason is very largely that, while we are pursuing the same policy, we are not pursuing it equally efficiently. One of the results of the policy of general economic nationalism at a time of depression is to make competition in what is left of the world market more intense than ever, and therefore to make the tariffs which are required to give efficient protection much higher than would be required in ordinary times. There is clear evidence showing that that is taking place.
A number of questions were asked of the Board of Trade yesterday, and the last trade returns will well repay study from that point of view. Foreign competing manufactured imports have begun to come in again in much heavier volume than during the last 12 months, and even now we are still importing as much competing stuff to this country as we imported in 1923, when the right hon. Gentleman the Lord President of the Council felt that it was imperative to go to the country in order to stop the flood of imports which was taking employment from our own people, and when there was still in a certain sense a world market which does not exist to-day. To-day, when the main immediate market is our home market, I respectfully suggest that the time has come for dealing more effectively with the matter, I am not suggesting that we should in any sense do away with the valuable work which the Import Duties Advisory Committee is doing in fixing what should be a normal tariff. But I regret that the Chancellor of the Exchequer could not see his way in this emergency to impose, subject to an appropriate schedule of exemptions, an additional 10 or 15 per cent. all round, which would have given him both immediately needed protection and also something not less important—something to bargain with without destroying the work
of the Import Duties Advisory Committee. After all, we have had experience recently of certain trade negotiations in which the duties imposed, representing the absolute minimum for the support of industry in this country, have been whittled down and given away for the purposes of bargaining.
There again I would suggest that there is room for a positive policy which would require in some way or other to be incorporated in the Finance Bill. It is that positive aspect of policy, which, I regret to say, I do not find embodied in the present Budget. It seems to me an admirable Budget for any date during the last 20 or 30 years when we might have had a surplus of £29,000,000—but it does not seem to contain any real attempt at a solution of our present-day problems. It seems to me a mere statement of Treasury policy, and Treasury policy, as we all know, pursues its own way regardless of the economic situation of the country and often of the general policy of the Government. The question upon which I should like to conclude is: What is the Government policy for the rehabilitation of industry and for the absorption of our unemployed?

7.41 p.m.

Lieut.-Colonel Sir WILLIAM ALLEN: I am glad of an opportunity, as coming from Northern Ireland, to take some small part in the discussion upon the Budget. The House will be aware that we pay the same taxes there as are paid over here, and therefore we are interested to the same extent. The speech of my right hon. Friend the Member for Sparkbrook (Mr. Amery) and the speeches of other hon. and right hon. Members seem to ask the question, "What would I have done if I had been Chancellor of the Exchequer" I was particularly struck with that idea when my right hon. Friend the Member for Sparkbrook was speaking. The Chancellor of the Exchequer is in the position, and is the only man, to decide what is to be done with the surplus and what has to be arranged financially for the coming year. He also possesses inside facts and figures which the rest of us know nothing about. I was particularly struck with the speech of the hon. Member for East Fulham (Mr. Wilmot), and, if his figures are correct, the Chancellor of the Exchequer must think again. The people of whom he spoke
have suffered so much. We have to admit, whether we like it or not, that they have to keep up a certain position before their relatives and friends and before the people, although they are often on the verge of starvation in consequence.
The question of taxation has always been a burning question. I remember the time when the Excess Profits Duty was put on. It was based upon the three years' income received before the War. Some industries at that time had made no profits at all, and during the War they began to make a little money. All that had to be given to the Government, while other industries which had in the three years immediately before the War made vast profits were let off payment on those increased profits. Something really must be done with regard to people with small incomes. I have put down a question asking that the Chancellor of the Exchequer may give us some information. There was a time when there was an allowance in respect of Income Tax assessment of £160 a year, and we know that the allowance now stands at £100. What would it cost the Exchequer if in the case of these people the amount was fixed at £130? Before the Debate on the Budget ends the Chancellor of the Exchequer would be well advised to consider what he can do for these people.
A certain expression has been used by the Chancellor of the Exchequer and by the right hon. Member for Sparkbrook with reference to the effect on the country of a reduction of the Income Tax by 6d. The Chancellor of the Exchequer said, in his opening statement:
I had no hesitation in coming to the conclusion that the relief which would confer most direct benefit upon the country, which would have the greatest psychological effect, and which would impart the most immediate and vigorous stimulus to the expansion of trade and employment, would be a reduction in the standard rate of Income Tax."—[OFFICIAL REPORT, 17th April, 1934; cols. 925–6, Vol. 288.]
I agree, but that phrase and that statement is just 12 months too late. We all remember this time 12 months. We remember the depressed state of the House when the Chancellor of the Exchequer made his Budget speech. We went away with wet blankets wrapped round us. It went out to the country, "No relaxation, no remission of taxa-
tion," and for three or four months there was a damp cloud all over England, Scotland, Wales and Northern Ireland. What would the difference have been had the psychological influence been used at that time of a 6d. in the £ reduction in the Income Tax? We should have been told that that would have meant an unbalanced Budget. At any rate, it was just the moment when we needed the psychological influence of a reduction of 6d. in the Income Tax. It would have brought about confidence in trade 12 months earlier than has been the case. What has happened this year? Look at the posters of the evening Press—a boom on the Stock Exchange, and so on. How much sooner that boom would have come if there had been a reduction in the Income Tax 12 months ago. I remember very well leaving the House of Commons a year ago and remarking to a friend: "The Chancellor of the Exchequer has lost an opportunity of all the Chancellors of the Exchequer in this country in not using this psychological moment to stir up the country to improve its trade."
The Chancellor of the Exchequer has been congratulated, and he deserves congratulation, but he is simply the mouthpiece of a virile nation. Despite the wet blanket and the damp cloud of 12 months ago, our people have risen to the occasion, and trade has improved. I do not forget all that the National Government have done in order to assist industry. It would be a great mistake to forget that, and I give them credit for the assistance they have given to industry. In that way the Chancellor of the Exchequer has been helped in obtaining a surplus. That surplus has come because of the fact that a virile nation is alive to the situation, and not because of the Chancellor of the Exchequer's speech of last year. The country deserves every credit for what it has done. It is true to say that had the reduction in the Income Tax been made last year we should have had a better Budget this year.
There is one point to which reference has not been made and on which I should like to touch. No matter to what business man you speak, no matter to whom you address the question when speaking to persons connected with the Stock Exchange, I have never yet met anyone who would disagree that Death Duties are capital—the capital of the
nation. At one time there were no such things as Death Duties. The Chancellor of the Exchequer who first introduced Death Duties hoped that they would produce £1,000,000. This year the Death Duties have realised £75,000,000—£75,000,000of the capital of the country. That has been going on for years, and we have been treating it as income and spending it in this way and that. When will this country and when will a Chancellor of the Exchequer realise that this is the capital of the country and that it must be used, or partly used, for the purpose of the reduction of our enormous National Debt? Here is an opportunity for a Chancellor of the Exchequer some day. If I were Chancellor of the Exchequer, and that is a great stretch of the imagination, one thing I should keep before my mind would be that capital taken from the pockets of the people must not be used as revenue, and some part of that £75,000,000 would be used for the reduction of the National Debt—it might be one-third, one-half or three-forths—and would not be used as revenue.
A great deal has been said in this Debate in an imaginative way. For instance, the hon. Member for Caerphilly (Mr. M. Jones) said, very earnestly, what would happen if his party occupied the Government benches and had a surplus of £31,000,000. The House seamed to be amused, because they could not imagine the Labour party having a surplus of £31,000,000. However, this is a time of imagination, and every hon. Member has given the Chancellor of the Exchequer splendid advice, largely perhaps from their imagination, or from their political economy standpoint. Whatever has been the source of their information, one thing is very certain and that is that the country has now got a stimulus that it has not had for years. We can congratulate the Chancellor of the Exchequer that he is the individual who is taking advantage of the virility of our great nation. Let us hope that in the coming year it will once again be the great nation that it was, a nation of which we have always been justly proud, and that it will retain its superiority among the nations of the world. But we must never forget that trade and the conditions of prosperity are allied and joined with those of other nations and that their prosperity means ours.

7.57 p.m.

Mr. BANFIELD: Every hon. Member who listened to the speech of the hon. Member for East Fulham (Mr. Wilmot) must have felt that he conclusively proved his case, that the lower middle classes have a very distinct grievance so far as the Budget is concerned. I have no intention of wasting my sympathy on the lower middle classes. I am of the opinion that they ask for all they get. They are always the backbone of the Government, and are always to be depended upon to rally to their support. They make no protests. They are like dumb sheep brought to slaughter, and the Chancellor of the Exchequer, knowing that they are incapable of a kick, proceeds to treat them in the way described by the hon. Member for East Fulham.

Mr. PIKE: Did the hon. Member say "always?"

Mr. BANFIELD: If they are quietly prepared to lie down and be treated in the way they are being treated on this occasion, then I do not think that hon. Members like myself who believe that you get nothing out of Governments or Chancellors of the Exchequer unless you fight and struggle for it, must leave them to the tender mercies of the Chancellor of the Exchequer. No doubt when everyone else is satisfied he will throw a bone to the good dogs that the middle classes have always been to the Tory party.
Out of the Debate there has emerged a very definite point and one which requires some explanation from the Chancellor of the Exchequer. Speaker after speaker, chiefly from the Government benches, has suggested that the estimated income for the next year has been seriously under-estimated. Reference has been made over and over again to excessive caution. It has been suggested by nearly every speaker that there is a very great possibility of a large surplus next April. If there is any foundation for that statement, then not only we on these benches but hon. Members in all parts of the House ought seriously to protest against very bad budgeting. To take money out of the pockets of the taxpayers which is not likely to be wanted for the revenue of that year seems to me to be a bad thing, and if it is done simply for the purpose of political window-dressing it becomes an even worse thing.
The Chancellor of the Exchequer referring to the Unemployment Insurance Fund told the House yesterday that for every 100,000 the figures of unemployment fell the surplus in the Fund rose by something over £3,000,000. Side by side with that statement we have to bear in mind the general tone of optimism expressed by the right hon. Gentleman. He suggested that probably the figures of unemployment would drop considerably during the next 12 months; that we were, on a wave of prosperity. If the Chancellor of the Exchequer is right then, obviously, there will be some millions of pounds as a surplus next April. The Chancellor of the Exchequer and the Government are entitled to be congratulated on their decision to restore the unemployment cuts. Why should not they restore them? They have done the right thing. We are only sorry that they did not do it 12 months ago. We have urged from these benches time after time that the cuts should be restored and, therefore, we are prepared to say, "Well done, you have done precisely the thing we should have done ourselves." But there will be a lot of people who will want to get the credit for this.
The hon. Member for Bridgeton (Mr. Maxton) said last night that they brought 2,000 hunger marchers to London with the result that the Chancellor of the Exchequer has restored the cuts. It is surprising how this kind of thing spreads. I have 2,000 unemployed in my constituency. They have held a series of protest meetings asking for the cuts to be restored. They have sent resolutions to the Chancellor of the Exchequer, heaven only knows whether he reads them, but to-day they are very pleased that their efforts, their protests, the meetings they have held and the resolutions they have passed, have changed the stony heart of the Chancellor of the Exchequer. The right hon. Gentleman must feel rather pleased with himself in having given satisfaction not only to his own party but also in a number of unexpected quarters, all of whom claim the credit for the restoration of the cuts. I say sincerely that I care not who gets the credit, I am satisfied that the right thing has been done. But I am by no means so optimistic as the Chancellor of the Exchequer as to what is to happen
to people on transitional payments. Yesterday the right hon. Gentleman said:
This full restoration of unemployment benefit of which I have just spoken naturally carries with it a corresponding alteration in the maximum rates of transitional payments. I am proposing that there should be a Supplementary Estimate in respect of it of £3,600,000."—[OFFICIAL REPORT, 17th April, 1934; col. 924, Vol. 288.]
There is no guarantee that the maximum payments are to be paid to people on transitional payments. All that can be secured is that they may be paid, and I have grave doubts indeed about the administration of the new Unemployment Insurance Bill. I am afraid that in many cases the maximum payments will not be paid, and, further, I am sure that as long as the means test is administered on the lines it is at present the miseries and severe humiliations of men and women on transitional payments will remain as bad as they are to-day. However, as the Chancellor of the Exchequer is prepared to spend £3,600,000 on a Supplementary Estimate, I hope that, whatever savings there may be, whatever surplus there may be in April next, it will not be at the expense of men and women on transitional payments. It is all very well to restore the cuts on unemployment insurance benefit. That means that men entitled to standard benefit are to have the cuts restored, but the people who are suffering most to-day are those who are not entitled to the standard rates of benefit, the hard core of unemployment, the 750,000 who have now been unemployed for more than 12 months and who are no longer entitled to draw unemployment insurance benefit. They are on transitional payments, and they are the class for which hon. Members, irrespective of where they may sit in the House, ought to have the greatest sympathy and should make sure that the benefit given to those entitled to the standard rates of benefit filters through to those who want it even more.
The right hon. Member for Sparkbrook (Mr. Amery) asked a very pertinent question. He wanted to know what was the Government's real policy. I am afraid that the Government will have some difficulty in answering. I hope it is not the opinion of the Chancellor of the Exchequer or his advisers that the figure of 2,200,000 unemployed must be looked upon as a kind of fixed figure for unemployment in this country. Whatever the
Budget may do in the way of restoring unemployment cuts we must not forget that what the unemployed want is not the so-called dole, but work, and a Budget devised to bring work, and to spend money for that purpose, would be a greater blessing to them even than the restoration of the cuts. In the course of his speech, the right hon. Gentleman said:
On the other hand, our export trade, although it has been better than it was, is still far behind the figure at which it stood only a few years ago."—[OFFICIAL REPORT, 17th April, 1934; col. 906, Vol. 288.]
Let me draw the right hon. Gentleman's attention to the comparative failure of the Heavy Oils Duty. It has brought in £750,000 as revenue, but in the process of getting that revenue grave harm has been done to the nut and bolt industry. If the effect of a tax is that the exports of a particular commodity fall and, in this case, leads to a decrease in the use of iron and steel and coal, then a revenue of £750,000 can be very dearly bought. As a contribution to a solution of the coal question, it is indeed very small. I have before me information from a big firm in the Black Country who say that the increased cost, their share of the penny per gallon, has meant that their selling price has gone up by 5s. per ton. They say:
We are already experiencing difficulties in competing in the export market with foreign countries and, coupled with the increased cost of raw material"—
that is the increased cost of iron and steel, due to tariffs—
this increase makes our chance of securing this business doubly remote.
They give a few figures showing that in 1924 the export of bolts and nuts was 30,698 tons, in 1930 it had fallen to 26,499 tons, and in 1932 to 10,908 tons. Trade has been a little better, but for the six months ending June, 1933, the exports were something less than 6,000 tons, so that they will be rather higher than the 1932 figures, but still very much below the figures for 1924. Some hon. Members believe that if you tax a certain thing in a certain way and the industry can bear it, you may be conferring some benefit on another section of industry. In the production of nuts and blots, the iron ore is produced in the mines and the coal which is used in the pits. The coal and iron ore is carried on the rail-
ways using coal to the factories where more coal is required to be used, as well as steel for which more coal is required and, therefore, if you do anything at all to stop the industry from exporting its product, and the nut and bolt industry must live by its export trade, it may mean that, although you are getting £750,000 from the tax, your factories are no longer using the same amount of iron and steel and coal and, therefore, instead of any benefit accruing, things are probably worse.
The Chancellor caused a pleasant surprise in some quarters yesterday by anouncing that there would be a reduction in the motor vehicles horse-power tax from £1 to 15s. per horse power, and he said that that would enable us to have cars of a (higher horse power and to compete better in the foreign market. The fact is that extreme difficulty is being found in the motor-car industry to-day in getting supplies of the necessary steel. The time has come when the Government ought clearly to state what they are going to do about the reorganisation of the iron and steel industry. The motor-car makers are unable to get stabilised steel prices. The Chancellor of the Exchequer may reduce the horse-power tax with the best possible intentions, but unless he is prepared to do something for the maintenance of stabilised prices of steel and for delivery within reasonable time, and to enure that the monopoly which he has practically given to certain steel firms is not abused, then the remission of taxation will be thrown away.
Some of us who have questioned the efficiency of tariffs are beginning to be justified in our opinion, not particularly by our own experience but by the experience of manufacturers in our own constituencies. It may interest the Chancellor to know that the Black Country manufacturers are in revolt against the way in which tariffs are working against the interests of their concerns and the interests of the men and women whom they employ. I hope that the Chancellor, who is anxious to help the motor-car industry, will devote some attention to the question of ensuring that the industry is supplied with its raw material at reasonable prices, with delivery within reasonable time, and that the advantage which he has given to
steel manufacturers is not abused to the detriment of a great and growing industry like the motor-car industry.
Let me come to one more point. We believe that when there was a surplus of this kind and when there is the possibility of a surplus next year, something might have been done by the Government so far as expenditure on public works is concerned. In connection with the roads particularly there still remains a very great deal to be done. The Chancellor knows that complaints are made about the state of bridges. He knows that a number of them are classed as dangerous and as quite unfit for modern traffic. It should not be beyond the power of the Government to do something by raising a public loan for public works. The right hon. Member for Sparkbrook when he talked of economic nationalism seemed to believe that in future each nation would live to itself, taking in its own washing. That is an impossibility. Even the Chancellor of the Exchequer in his Budget Speech recognised that this country can only become really prosperous by re-establishing the channels of trade with other countries.
Let me make an appeal to the right hon. Gentleman. I suppose that appeals made from the Opposition side generally fall on deaf ears, and, as I am reminded, to-night they fall on empty benches. But I would suggest to the Chancellor that it is not sufficient to restore the cuts to the unemployed. If that were the only policy of the Government it would be a very bad policy indeed. Employment is what our people need most. Although the Chancellor has restored half the cuts to civil servants, policemen, teachers and others, I am afraid that those concerned will not be extremely thankful but will believe rather that when there was a surplus the cuts should have been restored in full. I ask the Chancellor and the Government to recognise that in 1931, when the cuts were inflicted upon civil servants, teachers and so on, thousands of private employers all over the country also imposed cuts on their own workpeople.
Here in London firms which had paid 20 per cent. for years, paid 25 per cent. last year and probably will do so next year because, following the Government's
example in imposing cuts, they took half-a-crown from the wages of their workpeople and even a shilling from poor girls who acted as waitresses. I hope that the Government, having given an example in doing something to restore the cuts, will now urge employers up and down the country to do likewise. The working classes will not always lie down under the present condition of things. If the money that was taken from them in 1931 is not restored voluntarily it will have to be restored to them even if it means suffering and striking and fighting in order to compel employers to do what they ought to do without the workers having recourse to that sort of thing. I hope that someone on the Government side will not be afraid to tell the employers that now that prosperity has returned—the Stock Exchange is very pleased about it and our masters and pastors are saying, "Hurrah for the present Government"—the 1931 cuts must be given back. Employers should do that, not after the sacrifice and struggle of the people, but as a matter of right and justice and with a desire to do to others as they would be done by.

8.25 p.m.

Mr. BOULTON: I wish to pay my tribute and offer my warm congratulations to the Chancellor of the Exchequer on the very favourable and happy results which have been achieved, to a great extent owing to his successful handling of the nation's finances. On the other hand, the British public ought to have due credit given to them because it was they who placed the National Government in office. The formation of that Government created the confidence which paved the way for credit revival and that restoration of financial stability which is the first essential step to trade recovery—a fact which hon. Gentlemen opposite do not seem to realise. The protection which is now being given to industry, the abundance of cheap money, and the trade agreements which are being entered into, all form a solid groundwork on which to build. Surely no more favourable position has ever been presented in any country for a policy of reconstruction which is, if I understand correctly, the second objective of the Government. The speed with which that reconstruction can be carried out must largely depend upon the view which the Government take of the current year's prospects or, in other
words, the extent to which their optimism will allow them to go.
The reward for the sacrifices which have been made in order to enable us to pay our way through hard and depressed times is surely that when better days come we can more easily and with freer conscience and wider vision commence to tread the road of expansion. I believe it is in that direction that the nation is anxiously and expectantly looking; the Chancellor of the Exchequer has now got his foot on that road. He is however proceeding with a cautious optimism, if I may so describe it, which will not I think endanger his reputation for sobriety. His revenue estimates upon which we have heard so much to-day are even more conservative than many of his most pessimistic friends could have anticipated. I agree, however, with my right hon. Friend that this is his best Budget and I for one, am not going to quarrel with it. I believe that it is a popular Budget and it is certainly a welcome Budget. It will be received with general satisfaction except by hon. Members opposite. The reliefs that are now to be given, and the restoration of cuts show as I think every fair-minded man would agree, fairness, justice, and considerable wisdom. There is no relief to be given under the Budget that I welcome more than the restoration of the cuts to the unemployed and which, I think, justifies the sound and practical policy which the Government are pursuing. As the representative of a depressed area I can assure my right hon. Friend that in spite of the somewhat envious and carping criticism which I am afraid we have heard expressed to-day, his action will be hailed with a thankfulness and appreciation that cannot be measured in words by many thousands of people.
If, however, there is one relief which will do more than another to assist trade and employment it is the remission of 6d. on the Income Tax. The reduction of Income Tax is a matter in which I have taken some interest, as one of those who a year ago introduced a Resolution on the matter in the House of Commons and urged my right hon. Friend even then to reduce the Income Tax by 1s. I thought that that was the psychological moment at which to take such a step to assist industry and employment. I have no reason to withdraw the views which I then expressed but I do not wish to dwell upon the past. What I would
point out to hon. Members opposite is that Income Tax and Super-tax payers have had three substantial cuts during the period under review, and although the remission of this 6d. will be most welcome, yet it only represents a small part of the contribution which this body of people have made. It will, however, be a tonic which is necessary for national convalescence, and it will be a recompense for the loss of income which they have been called upon to suffer. The criticisms which we heard from the hon. Member for Limehouse (Mr. Attlee) yesterday and from the hon. Member for Caerphilly (Mr. M- Jones) and one or two others to-day, show a disregard for the true interests of the workers of this country and of our poorest people which to me is astonishing. It only shows how unreal their understanding of the position is, how far removed they are from the realities of the situation.
There is one point to which I would draw my right hon. Friend's attention. It is a matter which I have not heard raised here before, and although it arises in connection with housing legislation I think it is a Treasury matter. I refer to the case of property which has been assessed for Estate Duty and on which the duty has been paid. Then in a month or two, the Ministry of Health confirm an. Order directing that same property to be cleared at the owner's expense as being worthless, without any compensation at all being payable. Cases of this kind have been brought to my notice in connection with the area which I represent. It cannot be right or equitable that one Government Department should be able to claim a value on a property for one purpose, and that, within a short period, another Government Department should be able to come along and claim that no value attaches to the same property when it is wanted for another purpose. My right hon. Friend will realise that this opens up a serious and important question of principle. It appears to me that it strikes at the very foundations of equity. As this question is causing no little concern I would be glad if my right hon. Friend could see his way when replying to express his view upon it or to give some idea as to what can be done to end what appears to be a grave injustice and one which ought not to be permitted to continue.
Apart altogether from the question of the allocation of the proceeds of the Budget and the divergent views that have been expressed, the work of the Government up to date gives those who are really honest in their opinions and who are capable of realising the position of the country when the Government were called into power to put things right if they could, some measure of satisfaction when reviewing the improved position of our finances, the renewed confidence in this country as the financial centre of the world, the improved position of our industries, the increase in the numbers of those employed, and the hope that has been revived in-those who are still out of employment and have been waiting all this weary while. So much for the present. Rosy is the glow, let us hope, of the rising sun of the Budget surplus. So far so good, but what of the 1,000,000 able-bodied men who are still unemployed? I mention 1,000,000, although you may put it at 1,500,000 if you like, because I believe 1,000,000 is now the size of our skeleton in the cupboard.
We cannot forget the oppressive unemployment burden on our backs. I well remember, during the General Election, men sitting dejectedly in their homes and saying to me, "Well, the Socialist party have promised us everything and done nothing; we will see what your party can do about it, and good luck to you." They were so patient in their depressing outlook, so ready to adopt any reasonable proposals for the amelioration of their condition; but that depressing burden placed on our victorious shoulders at the General Election is still there. The weight of it does not decrease by the passage of time as rapidly as we should like. The straps that bind it on us seem inclined to cut into our flesh more and more. I know that the last lap is always the most difficult, but this problem of 1,000,000 able-bodied unemployed cannot be evaded, and it cannot be forgotten in a complacency engendered of better trade returns or a Budget surplus. Indeed, rather must it be the touchstone of the genius of the Government as to how this problem is to be solved. There is no doubt that it will take deep thinking.
I was rather struck the other day by a proposal made in an article written by
my right hon. Friend the Member for Sparkbrook (Mr. Amery), and after reading the War memoirs of the right hon. Member for Carnarvon Boroughs (Mr. Lloyd George), such convincing evidence compels one to the conclusion that a thinking and planning department of the Government is urgently necessary. High courage will no doubt be required, backed perhaps by action savouring of a marriage between the principles of capitalism and, it may be, practical Socialism, producing a progeny peculiar to the nation, but somehow we always seem to compromise, and when we do decide our line, I think we ride our mount all out. I therefore respectfully suggest to my right hon. Friend the Chancellor of the Exchequer that if the 1,000,000 able-bodied unemployed can be gathered in the flowing stream of renewed prosperity, let nothing stand in the way, and if necessary let all our resources of credit be used, with care and with wisdom, of course, such as the assistance that is being given to the building of the Cunarder, upon which I think the Government are to be congratulated, so that when the end of the Government's term of office arrives, it can be said that Capitalism has delivered the goods and so finally extinguished the dangers of impracticable Socialistic alternative methods. I believe the nation fully appreciates the results that have been achieved by the Government and wholeheartedly welcomes the Budget position to-day. I believe that the nation is solidly behind the Government, but I want to see the Government seizing the unique opportunity which they have now got for a forward policy of economic reconstruction for this country and towards a gradual closer economic unity of the Empire.

8.42 p.m.

Mr. HOROBIN: I wish to confine my remarks within a very short space, and I do not, therefore, propose to comment upon any of the speeches in criticism of the Budget to which we have listened, except extremely briefly in regard perhaps to three broad criticisms. The first in time was with regard to the American debt, and if it be made a point of criticism that we are now showing a surplus without having previously come to an agreement with regard to our foreign debt, that argument cannot be taking
into account the by now obvious fact that there are two elements in the possibility of dealing with that debt, one of them a Budget surplus in this country, which we already have, but the other the availability of the exchange wherewith to pay it, and it is painfully obvious that with the present positon of international trade it is absolutely out of the question, all points of equity aside, for a resumption of payments on the old scale to be made. I think it is useful to make that point because of the damage which it might do to this country if it were lost sight of.
We have had certain references to the undesirability of finishing up the year with a surplus, and it has been argued at length by several speakers that that is inevitable and that the Chancellor's estimate of income has been deliberately written down. I do not want to argue whether that is correct or not. I would only say that, taking those hon. Members who have made that criticism at their own figure, when you are faced with a deadweight debt of between £7,000,000,000 and £8,000,000,000, and in as uncertain a world as this, where you cannot be quite certain of being exactly right, it is comparatively unimportant if you are £20,000,000 on the right side, whereas it is exceedingly undesirable that you should be £20,000,000 on the wrong side.
There is another point I would like to mention. It is a small point, but it was made by a speaker of such distinction that it may be worth while referring to it. I refer to the point made by the right hon. Member for Darwen (Sir H. Samuel) with regard to the repayment of the debt on the unemployment fund. Whoever replies for the Government will correct me if I am wrong, but I think the right hon. Gentleman fell into a fairly simple and, unusually for him, technical error. He added to other arguments, good or bad, in favour of using the surplus from last year to repay part of the debt on the unemployment fund the argument that the debt is costing between 3 per cent. and 4 per cent.; if you use the surplus as the Chancellor is using it you only repay floating debts of 12s. or so per cent. and, therefore, there will be a saving in money by using last year's surplus to repay the unemployment debt. I may be wrong, but surely that is a complete misapprehension. The only debt that can be paid in any
case is floating debt. Other debt has a definite date of redemption which cannot be advanced. What the Treasury is charging is a matter of bookkeeping as between the fund and the Exchequer. The only actual saving to the taxpayer is in the redemption of floating debt. Therefore, I submit there is nothing in the argument which has been advanced by the right hon. Gentleman the Member for Darwen in favour of repaying the debt on the fund rather than merely reducing the number of Treasury Bills outstanding.
This is the third Budget that has been presented to the country upon a definite theory of Government finance in the face of depression, and it will not be, I think, a waste of time for the Committee to consider the lessons of our experience over the period covered by these three Budgets. The theory, if I may put it so, is the old Treasury view, as it used to be called, and it is a theory which has not carried the day without very bitter and prolonged opposition, not only from Members on the Opposition benches, but from a considerable section of Government supporters. The objection has been continued even in the Debate to-day. The whole question of the desirability of balancing the Budget and of public works has been argued again to-day from the Opposition benches and has, therefore, presumably some vitality still in it. I turned back after listening to the Chancellor yesterday to the Debates on the Budget of last year. The hon. and gallant Member for Stockton-on-Tees (Mr. Macmillan), who is unfortunately not in his place, may be taken as a leading representative of the opposite view as to how the Government should have proceeded; and he said on the 22nd March last year:
The Chancellor will have to make up his mind as to whether he is prepared to introduce what, in fact, will be to some extent, an unbalanced Budget for 1933–34, both by reducing the Sinking Fund to nil and by making such reduction in taxation that the Government expenditure for that year will exceed the revenue which they extract from the taxpayers."—[OFFICIAL REPORT, 22nd March, 1933; col. 347, Vol. 276.]
To descend to comedy, I may turn to the-principal exponent of this view outside the House. I will quote from Mr. Maynard Keynes, who in the "Times" of the 5th April last year, when arguing for a policy which included a
£50,000,000 deficit and development loans running into the wrong side of £100,000,000, said:
I should be hopeful that this relief would increase employment after a certain interval by 300,000 or 400,000 men, making a total improvement of say, three-quarters of a million men from the two branches taken together,
that is to say, public works and a deficit on the Budget. I wish to draw the attention of the Committee to these words:
Nor would there be cause for blame even if time and disappointment were to reduce our hopes by one half.
that is to say, if in April of this year, as a result of adding some hundreds of millions to the public debt, and by having a large deficit, there will be no cause for blame if we had increased employment by 375,000 men. We are now in the happy position of being able to test from facts, pot from guesses, what actually has been the increase in employment by carrying out the exactly opposite policy which was engendered by unintelligent Treasury officials, by the Machiavelian people at the Bank of England, and by the unimaginative and practically superannuated Chancellor of the Exchequer. The number of people in employment in 1933 was 9,443,000, and as a result of this feeble imagination, orthodoxy and general lack of intelligence, by 1934 it has gone up to 10,058,000; in other words, an increase of employment of 615,000 men, or almost exactly double the figure which the high priest of the opposite view said there would be no cause for blame if we achieved after taking such risks and increasing the burden of debt.
It may be worth while before leaving this point to draw the attention of the Committee to a quotation from the "Economist" Budget Supplement, which has been referred to to-day, and which, oddly enough, has not evidently come to the attention of the Opposition, who make such use of the Supplement, although it appears on the first page. It is dealing with this point and is explaining why we alone have managed successfully to deal with the depression along those lines. It first deals with the depreciation of sterling and there is a certain element of truth in what it says, but every other country has had depreciation, and it is not that which distinguishes us from other people. The second reason they give is
much more interesting, and I would draw the attention of the Opposition to it:
The fact that the British hanking system almost alone among those of the great Powers was untroubled by the suspicion of the public and was consequently able to give full and speedy effect to the policy of cheapening credit," etc.
That may be taken as the end of the theory of the bankers' ramp and the wickedness of the Treasury policy in these matters. We are now in a position to say that on those grounds the orthodox, old-fashioned and unimaginative policy of the City and the Treasury Bench has done rather more than fulfil what was claimed for it. As to whether other people would have done the same or better, it is a matter of guesswork and we can argue about it for ever. What this policy has done is not a matter of guesswork. I wish to detain the Committee for only a few moments more on a related point.
The Chancellor used some words the other day which have been referred to in another connection by my right hon. Friend the Member for Darwen. He said that the increase in the returns from direct taxation and I think, speaking from memory, that he may have referred to increased returns from other taxes as well, would only begin to be substantial next year and possibly the year after, at a time when, he said, he would be very glad of the increased revenue owing to increases in expenditure which he could foresee. I think I am quoting fairly the sense of his words. Of course I do not know to what increases of expenditure he was referring. He may have been referring to possible increases in the debt charge, may have been referring to the deplorable possibility of an increase in armaments expenditure, but there are some Members even among the Government supporters, and there are, I regret to say, even some Members of the Government, who may have had other types of increase in mind. This would not be the occasion to deal at any length with the other branch of the panacea which is the property, the sort of patent medicine, of the school of thought to which I was referring a moment ago, namely, the notion of, as I think it is usually called, planning or reconstruction or rationalisation or Macmillanisation—the names vary.
This would not be the occasion to deal with that at any length, especially as its principal exponent in the Government is for reasons which we all deeply deplore, temporarily not with us. But one aspect of that alternative policy is very relevant to this Debate, and that is the purely cash aspect. So far it has only been tried in this country in agriculture, but though we (have had experience of it in several different branches of agriculture it is always a new excuse but it is always the same old story; whether it is wheat or milk or pigs or sugar it always leads to drains on the Exchequer. I am not going to overstate the case in the least by pre tending that so far those raids upon the Exchequer have been very grave, but they have not been negligible. Those charges would have been sufficient, and more than sufficient, to pay for the other half of the restoration of the wages cuts and considerably more than is required for dealing with the Entertainment Tax. But thanks to the prescience of that grand old Gladstonian Radical the present Chancellor of the Exchequer the raids upon the public purse have been kept within bounds. I can only hope he was not referring to the possibility of his grip relaxing when he said he foresaw that there would be increased demands upon him in the future. We all know that the appetite grows on what it feeds upon, and there are plenty of other industries, and other branches of agriculture for that matter, which would like to get their share. Every time the Ministry of Agriculture think of a new animal, vegetable, or mineral it costs this country £1,000,000.
All I say upon that point is this, that whatever the supporters of that policy may say, the most they can say is that it is too early to form a final opinion upon what happens when you try Socialism but do not call yourself a Socialist. Their policy at the most can only claim that it is still on trial. But the alternative policy, the policy enshrined in this Budget, the policy which has been behind the general financial policy of this country in the last three years is not upon its trial; it is a proved, triumphant and deserved success. Members of the Committee may think somewhat differently from myself upon this matter of the desirability of increased Government interference in industry and increased committees for planning other
people's business. As that argument is continued, as it will be continued for the remainder of this Parliament and probably for the remainder of our lifetime, I ask them, when they are inclined, perhaps, to be impatient at what sometimes is supposed to be an old-fashioned, too orthodox, and too unimaginative insistence upon the danger and expensiveness of their policy, to please, to remember this. In so far as their different policy endangers or may in the future endanger the success of the effort which has been made and is now, at least, reaching obvious success, to reduce the burdens resting upon ordinary private enterprise, it is fair, as far as the two policies are inconsistent, that they should at least think twice before they put their money upon the policy which is only at the stage of making promises at the expense of the policy which has led to a Budget which has so deservedly received congratulations and has so widely enhanced the reputation of the Chancellor of the Exchequer mainly responsible for it and of the National Government as a whole.

9.3 p.m.

Mr. D. MASON: While I associate myself to a considerable extent with the remarks of the hon. Member for Central Southwark (Mr. Horobin) in his praise of that Gladstonian tradition which many of us still believe in and support, I rise to draw the attention of the Financial Secretary to the Treasury to one aspect of this Budget which has been alluded to by a number of speakers during this most interesting discussion. They have rejoiced over the profit we have made on the Exchange Equalisation Account. In the first place, we have not made a profit. If hon. Members will carefully study the words of the Chancellor, they will see that what he did say was that the Exchange Equalisation Account showed a profit. He said:
This sum is, of course, covered by assets and I may say the Account continues to show a profit.
On a former occasion I asked the Financial Secretary, with regard to the purchases of bullion on account of the Exchange Equalisation Account by the Bank of England; whether a loss had been incurred or a profit made, and he very properly replied that until the transaction was complete, until the Bank of England had disposed of the gold bullion, obviously one could not say
whether a profit had been achieved or a loss incurred. Hon. Members may have within their recollection an admirable speech made by the hon. Member for Putney (Mr. S. Samuel) in which he showed that it was comparatively easy to follow what is going on with regard to this Exchange Equalisation Account. I have endeavoured to follow the transactions, and so far as I am able to follow them the Bank of England has for a considerable time been accumulating a large amount of gold bullion. It began purchasing that bullion at about £5 to £6 an ounce. According to the agreement which has been entered into between the Bank of England and the Treasury the gold bullion goes into the Bank of England at the old Mint price. The old Mint price was £3 17s. 10½d. for a standard ounce of gold, or about £4 19s. 11d., or say £5, for a fine ounce of gold.
Hon. Members will easily follow my argument that, if the Bank of England had been purchasing considerable amounts of gold bullion at say £5 or £6 per fine ounce, it is obvious that, if the market price has been forced up by this inflationary policy to between £7 and £8, the account to-day shows a profit; but it only shows a profit if the Bank of England disposes of the gold at the higher figure. According to the Act under which the Bank of England's notes are issued, if we should ever come to restore the £ as some day we hope to do, then, instead of a profit, the taxpayer will have to make good the difference between the price at which gold bullion goes into the Bank and the market price which the Bank had to pay. That difference will be debited to the taxpayer, and, if we restore the £ at anything approaching the old value, the taxpayer will have to make good the difference. What that difference will be can easily be estimated as an average figure. It would cost the taxpayer today anything from £20,000,000 to £30,000,000, so that this imaginary profit disappears. The Chancellor of the Exchequer told us in a very naive way as if he attached very little importance to that, but I noticed that, when he stated that the Exchange Equalisation Account showed a profit, hon. Members fastened upon it as though it had been a profit which had been achieved. If, however,
we do that, we deceive ourselves, because no profit has been achieved at all; the whole thing depends upon the monetary policy of the Government. We have been told that the Budget is now a Budget of expectations. What are we to expect from the Government? We might legitimately press the Financial Secretary, who is to reply on behalf of the Government, to say what they intend to do. Do they intend to restore the £ at anything like the old parity—in which case the taxpayer would have to face this loss—or do they intend to devalue it at, say, about the existing value of the £, in which case all creditors of the State, all wage-earners, and all people who are in receipt of pounds in any shape, whether as wages, dividends or interest, will have to face that depreciation? We are entitled to know, because to pursue this policy of continuous inflation would be ruinous. To argue that a profit has been achieved is to mislead the Committee, and is not worthy of the high character of the Chancellor of the Exchequer or of the Government of which he is so distinguished a member.
There is another point to which I should like to draw attention. The Chancellor seemed to rejoice and to take pride in the fact that he had not borrowed for the purposes of the Sinking Fund. He seemed to imagine that he ought to do that because he has been given power to do it. I think be added something like £7,000,000 to last year's surplus, which enabled him to show a realised surplus of £39,000,000, because he has used it, and properly used it, for the purposes of the Sinking Fund. I should like to submit that there is no Sinking Fund; or, in other words, that there is a real Sinking Fund only when you have a surplus over and above your expenditure. If you borrow for the purposes of the Sinking Fund, it produces no effect whatever upon the stock. If you go into the market and borrow, that depreciates the stock to some extent. Then, when you go into the market again for the purpose of redeeming your debt, the stock merely goes back to the price at which it was before. Any effect is purely illusory. Some years ago I protested against putting into prospectuses for loans this provision, which is an illusion. That was confirmed by the Colwyn Committee, which was set up for the purpose of going into the question of the
National Debt. The last loan of £150,000,000 which has just been issued has this provision, which is a piece of extravagant waste and has no effect whatever. If you have a real surplus over and above your expenditure, then, obviously, discretion should be given to the Chancellor of the Exchequer and the Treasury as to which stocks it will be advisable to purchase if they are in a position to redeem the debt. If you are compelled by Statute, as in the case of the old War Loan, frequently to go into the market to borrow at a high rate of interest to pay off debt, there is no advantage to the price of your stock. Again I would repeat that, if you go into the market and borrow money your stock depreciates. The general run of all Government stock rises or falls together, and when the Government go into the market to purchase stock to reduce the amount of loan, obviously it appreciates the market value of the stock, and when the purchase price of the stock goes back to the figure at which it was before, there is no advantage whatever. There is only an advantage as I have said in reducing debt when you have a surplus over and above your expenditure, and it should be left to the discretion of the Treasury and the Chancellor of the Exchequer as to which stock it is most advisable to purchase. I would press the Financial Secretary to follow, not my recommendation, but the recommendations of the Colwyn Committee, who showed how foolish and illusory was this idea of borrowing for the purposes of the Sinking Fund.
I should like to make one or two observations on the general policy on which this Budget is based. I should like to add my tribute to the many which have been paid to the Chancellor of the Exchequer for his very able, admirable and lucid Budget speech. He referred to the fact that our internal trade had got better, but that our foreign trade still languished. He said that the channels of trade—

Mr. JOHN WALLACE: The Chancellor of the Exchequer did not say that foreign trade languished. What he did say was that we had regained the first position in the export markets of the world.

Mr. MASON: The right hon. Gentleman did unquestionably say that, while our internal trade had developed, our
foreign trade had not gone forward. I do not say that he used the word "languished"; he said that our foreign trade had not developed. He said that we led in the general depression among the nations of the world, but there is not much consolation in that. It simply means being first in trade that has been reduced almost to a shadow. It is better to be second in a trade which is of some substance than to be first in a trade reduced to a shadow. Trade throughout the world has been very much contracted, largely because, as the Chancellor pointed out, of economic nationalism and systems of quotas and tariffs, which of course destroy foreign trade. We live by our foreign trade—[Interruption]—hon. Members may be doing very well, and I hope that all those who are engaged in local trade are doing well; I wish them well in it; but we have to develop our foreign trade. How are we to do that unless we get rid of these hindrances? While financially we have achieved a great triumph as a result of the saving due to the conversion of the debt—I think I am right in saying that over a number of years the gross saving will be something like £97,500,000—that is largely because of cheap money the results of which we are now enjoying. But we have to go beyond that. We have to-day large numbers of our people unemployed—over 2,000,000. Many of our industries are moribund, and many of our export trades are, as I have said, in a languishing condition. Because of the restrictions that we are practising upon other nations it is impossible to carry on our foreign trade, at the high position which we formerly occupied. I see no evidence, in the trade agreements into which we are entering, that we have any chance of regaining the level of foreign trade which we formerly enjoyed, or that we shall be able to beat other countries in the great aggregate of our foreign trade. I believe that many hon. Members who subscribe to the present policy will eventually come round to the belief that while local trade may have recovered we must, if we wish to achieve the eminence which we formerly enjoyed, revert to the principles upon which that position was built up.

9.17 p.m.

Mr. STOURTON: The Chancellor of the Exchequer is to be congratulated upon having achieved a surplus of
£31,000,000 in Ms third budget, no mean performance in view of the fact that, as recently as 1931, the Socialist Government, according to information given us by Lord Snowden, expected a deficit in the neighbourhood of £70,000,000, with a further £174,000,000 deficit in the following year had that Government remained in office and had the basis of taxation been the same. These figures may well be pondered by the electorate as contrasting the sanity of National Government policy on the one hand with the "Bedlam" of Socialist policy on the other.
First, I should like to make one or two comments upon the concessions which the Chancellor has thought fit to make. The restoration of half the cuts and of the full unemployment benefit will do a great deal to increase the velocity of circulation of money, which is of itself a highly desirable object to attain, in these days, when so much credit is lying idle at the banks. I welcome the restoration of the full insurance benefit particularly, because the unemployed are out of work through no fault of their own and have felt the force of the cuts more than any other section of the community. I feel, with the majority of hon. Members of this Committee, that the unemployed should receive the first consideration from the Chancellor as, in fact, they have done.
It is a tragic circumstance indeed that in an age of greater abundance than hitherto ever known to mankind there should be lacking through some inherent fault of the capitalist system the means of distributing through purchasing power these advantages of our modern industrial system, whereas paradoxically we find many millions of people in the world are suffering from undernourishment, as it were, in the midst of plenty. This is a baffling problem which we ought all to endeavour to solve, in order to distribute over a wider area the production of our factories and farms, for the benefit of those who are at present living on a very low standard. The reduction in the Horse-Power Duty for motor cars and motor-cycles will do a very great deal to stimulate that trade, in which there is room for considerable expansion, both in the home market and export trade. We therefore welcome the concession on this side of the House.
I turn for a moment to the reduction of sixpence in the standard rate of Income Tax. My view of this is that it is all right so far as it goes; my complaint is that more might well have been done with advantage in this direction. Last year I was among the few hon. Members who ventured to challenge the over-cautious policy of the Chancellor of the Exchequer and to express regret that he had not thought fit to take 1s. off the Income Tax in order to stimulate industry, and add to the purchasing capacity of the people. The Committee know that the right hon. Gentleman turned down the idea. Who can doubt now, that, had he taken that course, the Budget would, in fact, have been balanced? It is clear that the Chancellor has over-budgeted on the expenditure side, and that regarding his Estimates he has pitched his revenue far too low. Surely the moral to be learned from over-caution is that in the long run it must delay recovery. I do not hesitate to repeat the advice which I gave last year that it would be far better if the Chancellor had seen his way to make a reduction of 1s. instead of 6d. He would have increased the pace of recovery of our industrial system, which is still in a somewhat languishing state. As a nation we are grossly overtaxed. To-day, a man deriving an income from mineral sources taxable at the highest rate pays 15s. 3d. in the £ by way of direct taxation, leaving him only 4s. 9d. change in every £. Such figures would turn Gladstone in his grave, for was it not he who expressed horror lest national expenditure should ever exceed £100,000,000 a year? Why, Sir, we have spent more than double that sum annually to pay interest on the National Debt, a crushing burden since it is wholly unrepresented by any form of asset whatsoever. If I may be permitted to offer a word of advice to the Chancellor, it should be his object to reduce the standard rate of Income Tax to three shillings in the £ before the next General Election, which we have reason to expect, according to the Lord President of the Council, as not being likely to take place until after the Budget of 1936. It would be a great contribution towards the solution of our unemployment problem.
There is less cause to congratulate the Chancellor when we analyse the accounts and consider how the surplus is achieved. As far as I can see, the Government have abandoned all hope of further economies.
One-third of the surplus was achieved by the death of a single individual; I think that the Chancellor should be grateful to him. One-third is due to the use of capital reserve, namely, the War Loan Depreciation Fund. Of the War Loan Depreciation Fund, £52,000,000 has been saved by the sacrifice made by the rentier class in the conversion of over £2,000,000,000 of 5 per cent. War Loan and lesser conversion operations. It is rather startling, but none the less chastening to reflect that, but for the saving effected by the great Conversion scheme and the lesser operations, the national balance-sheet for the year, instead of showing a surplus, would have shown a very heavy deficit. In other words, the surplus has been achieved entirely at the expense of the rentier.
Death Duties brought in the enormous figure of £85,000,000 in the last financial year. I would say of Death Duties that Budgets can no doubt be balanced on paper for many years by squandering the accumulated capital resources of the nation. I would ask the Chancellor to consider whether such a policy is wise. Does he realise to what a vast extent these duties contribute indirectly to the unemployment problem? Thousands of industrial concerns are deprived of working capital and thereby of the power of expansion; employes are discharged, and undertakings are in many cases closed down. The effect upon the countryside is even more devastating. Hundreds of country houses are shut, and for each one that is closed anything from 20 to 100 employés, indoor and outdoor, are thrown out of work and these people flock to the towns to swell the figures at the Employment Exchanges. It is written, that Man lives not by bread alone. It is to the detriment of England that taxation should be allowed to disperse the art treasures of the great country houses, the accumulation of centuries, the pride of the nation and of our civilisation, in order that Death Duties may be discharged and the nation be allowed to proceed on its Rake's Progress for a further limited period of time. These reflections are surely of grave moment and worthy of the attention of the Committee.
Another real danger is that the capitalist system is in serious jeopardy lest it go completely on the dole thereby undermining its very foundations. I know that
the Committee are always bored with quotations of figures, but I venture to quote to-night certain statistics, astronomical in their magnitude, of doles paid to industry by successive British Governments since the War. These are: Beet sugar, £42,000,000; the Milk Board, £3,000,000; the Bacon Board, £10,000,000; the Wheat Subsidy, £4,000,000; civil aviation, £3,000,000; the Trade Facilities Act, £65,000,000; the Export Credits Act, £38,000,000; Derating, for two years only, £63,000,000; the coal subsidy, £30,000,000; Atlantic shipping, £9,000,000; the Housing Subsidy, £123,000,000; a grand total of approximately £390,000,000. To this enormous total must be added the gigantic cost of maintaining the people for whom capitalism has been unable to find work since the War ended. In order to keep these people in existence there has been paid out in poor relief £1,107,000,000 and in unemployment insurance £916,000,000, making a grand total, with the figures already quoted, of £2,413,000,000. I respectfully submit to the Committee that these figures cannot be contemplated with complacency, but should be regarded with serious misgivings.
The story does not end there. More doles will be demanded very shortly for the beef trade, cotton, shipping and housing. The grave danger of these subsidies is that once they are granted they are difficult to withdraw. They tend to become powerful vested interests in those industries to which they are granted. To illustrate my point, I propose to quote one example only, that of sugar-beet. No less than £42,000,000 has been paid out to farmers who grow sugar-beet and to the factories since the subsidy was introduced in 1925, a period of nine years; yet that branch of the farming industry is no nearer to-day to being self-supporting than it was in, say, 1927. I should like to ask the Chancellor whether it is his intention and that of the Government to saddle the country with this burden in perpetuity.
I should like to raise one more point. I have never been afraid, since I entered the House, to advocate a policy of reasonable expansion. That is-one which will give some return for the money expended and which would justify the risk of Government credit being pledged. In this direction, in a spirit of
modesty and humility, I wish to tender a word of advice to His Majesty's Government. Two things to which the people of this country seem entitled and which they desire more than anything else are a job of work at a fair rate of wages and a decent house at a reasonable rent. By the ability of the Government to meet these demands will it be judged at the next General Election. As I have already said it is necessary drastically to reduce taxation in order that many of those who are at present unemployed may be restored to work.
At the same time I would recommend, that full advantage be taken of this Heaven-sent opportunity of cheap money and low building costs to plan the housing of our people so that all those who desire a house at a reasonable rent can be supplied within a definite period of time and not be further disappointed Let it never be forgotten that private enterprise has never been able to fulfil the task of housing the poorer sections of the community of this country, and is never likely to be able to. Let the National Government therefore ascertain housing requirements up and down the country through an inquiry of the local authorities. Having ascertained the number of houses that are required, let them calculate the cost and float a State-guaranteed loan at a low rate of interest, possibly as low as 3 per cent. The sum required may be as much as £300,000,000 or £400,000,000. At the same time a National Board should be set up to cooperate with the local authorities in the planning and spending of the money so raised.
In conclusion, I would say that I know that there are difficulties in the way. The short answer is that difficulties are only made to be overcome. In this case, I believe that they are by no means insuperable. Energy is expected and required of the National Government. In common with the great majority of Members of this House, I am not altogether satisfied with the piecemeal policy of the Government in dealing with slums, housing and overcrowding. It would be far better if these problems were all treated as one vast problem, to be planned and dealt with as a whole. I venture to say that if the Government would carry out a policy on the lines suggested, at least we could regard the
future with confidence, if not with complacency.

9.35 p.m.

Mr. ANEURIN BEVAN: In common with all other Members, I listened yesterday to the speech of the Chancellor of the Exchequer with the liveliest interest. I think I should not be exaggerating if I said that the country as a whole, and the House in particular, awaited the Budget statement with more eager anticipation than any Budget statement since the War, with the exception of the 1931 economy Budget. As I listened to the cheers of Members on all sides, it was borne in upon me that it was regarded as a very popular Budget. Indeed, probably the first impression in the country is that it is, on the whole, a fairly satisfactory one. But I believe that that first impression will not survive this evening's Debate, and it certainly will not survive this week's examination of the Chancellor's proposals. The acting Leader of the Opposition described it as a mean Budget, and Members in many parts of the Committee thought that was a most ungenerous statement to make. We are, however, not only prepared to make it, but to prove it. May I ask the Committee to consider the complete difference between the Chancellor's disposal of the surplus and the speech that he made? I was amazed, after having listened to many of the observations that fell from his lips, to learn what he proposed to do.
First of all, he pointed out that to a very large extent the surplus had been produced by the extraordinarily low rate of borrowing on Treasury Bills. He went on to say that the channels of international trade were blocked up and were being progressively blocked up, and, consequently, the only prospect of trade recovery which a discerning eye could see belonged almost exclusively to the home market. It has now become familiar even to unlearned people like ourselves that low rates of Treasury borrowing are symptomatic of trade depression, and that, instead of his being a restoration Budget, if what the Chancellor says is correct, the surplus has been brought about by the depression. It is because the depression continued that money is cheap. It is because money is cheap that the Chancellor, on his own showing, has a surplus. So the Chancellor has a surplus, not because private
enterprise is recovering but because it is still in difficulties. That is not merely a figure of speech nor an attempt to chop logic because, if you open any book or read any reputable journal on economic affairs, you will see widespread alarm at 'the continuing low rate of money in London, the failure on the part of world trade to expand, and the ominous rise in the price of securities on the Stock Exchange. There are large numbers of people who are saying that, despite the fact that we have a surer banking system than in America, there are evidences that the British financial situation is beginning to show some of the symptoms that the American Stock Exchange showed in the early years of the boom of 1929, that this vast flood of unemployed money is being used to promote an entirely unwarranted Stock Exchange boom, and that, unless some substantial expansion of internal trade can be achieved in the immediate future, there is every prospect that the slight recovery in trade that we are now witnessing will be followed by a calamitous, headlong plunge into a worse crisis than ever.
One would have thought that the Chancellor of the Exchequer, having arrived at that analysis of the situation, would have said, "If it is true that the outstanding characteristic of the Budget is that I have been able to borrow at such low rates and that the possibilities of world expansion of trade lie beyond my powers, I must so use my surplus as to promote an internal expansion of trade." Satisfied though hon. Members are—I am not putting this on party grounds at all—with the Chancellor's statement, this is a Budget which they will deeply rue. It is an unstatesmanlike Budget. Even judged from the requirements of British private enterprise, it is a stupid Budget. The right hon. Gentleman puts £21,000,000 into the pockets of those who, on his own showing, are even now not able to find useful employment for their money. I challenge hon. Members to dispute the fact—no one will deny it—that if you increase the spending power of Income Tax payers they will not spend all the addition and, in any case, even what they spend will be spent in stimulating industries which ought to be soft-pedalled and not stimulated at all.
We recognise that it is impossible to find any central principle animating
Government policy at all, but, if the Minister of Agriculture is to be regarded, as he has been regarded in many parts of the country, and certainly among Government supporters, as the only Member of the Government with any drive, one would have thought the Chancellor would produce a Budget which would support and reinforce the efforts of his colleague. The Minister of Agriculture is attempting to wrestle manfully with a surplus of milk, bacon, butter and eggs. Does the Chancellor use his £21,000,000 for the purpose of building up the internal market for butter, eggs, bacon and milk? No. The Income Tax payer will not have any more milk, butter or eggs. He will use his additional spending powers in stimulating just those very industries that we do not want to have stimulated. Leaving out the ethics of- the matter entirely and dealing with the relations between one section of industry and another, it is apparent to every thinking man that Great Britain will never again be able to accomplish an export trade representing 25 to 30 per cent. of her total production. Indeed, we have to balance our economy on something nearer to 15 or 18 per cent. I believe that it is true to say that the total trade which will cross the highways of the world will never bear the same proportion to the total world production again as it did in 1929, that there is an enormous redundancy of world commerce, and that modern industrial technique makes it possible to produce goods in each nation in large quantities, which formerly had to pass across the seas of the world.
Consequently, as has been pointed out on more than one occasion in this House, the development of electricity and the possibility of producing artificial climatic conditions in factories, and considerations of that kind have now to a very large extent superseded the old geographical limitations which governed the Manchester school of economics in the 19th century. If that is true—and I think it is broadly true—we have to base our internal economic organisation upon an export trade much below the 25 per cent. of our total production. If we have to do that, we must build up the home market for those goods which the working-class population can buy. Therefore, judged from the point of view of modern
economics, and by any careful and faithful analysis of the requirements of the existing situation, this Budget is stupid and silly, and is governed by purely political considerations, having no regard at all for the economics of the case.
The Chancellor of the Exchequer boasted that he had a surplus of £31,000,000. He had no right to boast that he had a surplus. If the Chancellor of the Exchequer has had such a surplus he has either miscalculated or has cheated people for a year. If he had a surplus of £31,000,000 it meant that he was withholding restoration for a year longer than he ought to do. Still we will give him whatever credit he wishes to claim for that fact. He could have disposed of that surplus even as it was accumulating by Supplementary Estimates. Hon. Members do not seem to have realised that, when he was asked time after time on the Floor of this House by Members on all sides to come to the rescue of the distressed areas. He was asked to provide money for housing schemes and for the development of the water supplies of the country, but, nevertheless, with all these urgent problems requiring assistance from the Exchequer, he sat down calmly and allowed the surplus to accumulate. A sum of £31,000,000! What will happen to the surplus. The Chancellor of the Exchequer started the year by saying that he did not want a Sinking Fund. He gets a purely involuntary surplus. Why should the Sinking Fund have at the end of the year a surplus it did not require at the beginning? He is still making no provisions for a Sinking Fund, so we now come to the conclusion that it is good Conservative economics to have an involuntary Sinking Fund, but that if the Chancellor of the Exchequer budgets for it, it is bad. It is clear to Members of the Committee that the Chancellor of the Exchequer is like a small man trying to steer an Atlantic liner as if it were a canoe. He is not in charge of the situation at all. He is on top of it, and cannot dispose intelligently of his surplus. If hon. Members in this respect would for a moment drop their party politics and consider the whole matter from a taxation point of view, the Chancellor of the Exchequer ought to be indicted for the way in which he has misused his Budget surplus.
I put forward with earnestness that the right hon. Gentleman the Prime Minister ought to have compelled the Chancellor of the Exchequer to have used that surplus for the promotion of industry in those districts where industry is most gravely required. The Prime Minister made a statement in the House last week which produced universal disquiet and disgust, and the right hon. Gentleman the Lord President of the Council made a speech at Bewdley to correct that indiscretion, and said that the Cabinet was devoting its earnest attention to the requirements of the distressed areas. What evidence is there of that in this Budget? The Chancellor of the Exchequer has a sum of money at his disposal which would make all the difference to Durham, South Wales and Lancashire. It is a gratuitous gift forced upon the Chancellor of the Exchequer in spite of himself. What does he do with it? He does what he never intended to do. He allows it to go to the Sinking Fund. I am entitled to say to the Cabinet, the Lord President of the Council and other Members here, that when they make speeches in the country saying that they are concerned for the distressed areas, and when the Lord President of the Council addresses his constituents and says that the Cabinet are concerned about the distressed areas, it is cant and hypocrisy. They have money at their disposal, and are not using it for that purpose. They do far more than withhold money from the distressed areas. They proceed in the Budget to inflict further damage upon them.
The Chancellor of the Exchequer, in the course of his speech, said that he was goin to adopt, as the first principle in the disposal of the surplus, the principle laid down by Lord Snowden that a surplus now must, in justice, be devoted as far as it would allow, to relieving those classes who suffered when the crisis was acute. Why has not the Chancellor done it? Hon. Members yesterday cheered in all parts of the Committee because the Chancellor of the Exchequer said he proposed to restore in full the unemployment cuts. That is precisely what he has not done. The unemployment cuts have not been restored. There is not a Member of this Committee who will be entitled to go to the country and say that they are restored. It is a mean and scandalous Budget. It would cost, as I understand
it, £24,000,000 to restore the whole of the unemployment cuts. The Chancellor of the Exchequer restores the standard rate of benefit which costs, we are told, £4,800,000 for a full year. The Chancellor of the Exchequer does not find one halfpenny of that. It comes from the Unemployment Insurance Fund. The Chancellor of the Exchequer said that the raising of the standard rate of benefit will raise the maximum rate of benefit for transitional payment, and that that will throw an additional burden on the Treasury. If he intended to restore the cuts to the unemployed, he would be able to say how much it would cost. It would cost £24,000,000. In accordance with his Budget statement he is to bring in a Supplementary Estimate for the restoration of the cuts in unemployment insurance benefit and the transitional payments' class, but he does not know how much they are going to get, because he is not restoring the cuts. It would cost £20,000,000 to restore the cuts to the transitional payment class, in other words, to abolish the means test.

Mr. GURNEY BRAITHWAITE: Are we to understand that the hon. Member is advocating the repeal of the Anomalies Act?

Mr. BEVAN: The hon. Member obviously does not understand the Debate. I understood that we are discussing the Chancellor of the Exchequer's statement to the effect that he is going be adopt the principle of restoring the cuts. The means test was proposed in 1981 in the Economy Bill. It was a part of the general economy, and the Chancellor of the Exchequer of that date, Viscount Snowden, estimated that that would save the Exchequer £10,000,000. There were 850,000 people on transitional benefit at that time, and Lord Snowden, who was then Chancellor of the Exchequer, said: "I shall save £10,000,000 by applying the means test to that class"; but, on the admission of the Ministry of Labour, instead of saving £10,000,000 a year they have saved £21,000,000 a year. Therefore, it will cost £20,000,000 to restore that cut.
The Chancellor of the Exchequer, in a most optimistic estimate, says that the raising of the maximum rate of benefit to 17s. a week will mean an additional cost to the Exchequer of £3,600,000. I
therefore declare, without any hesitation or fear of contradiction, that the Government still propose to get £16,000,000 a year from the unemployed. That is a mean and dastardly thing to do. They are proposing to give £21,000,000 to the Income Tax payer, and to take £16,400,000 from the unemployed. That is £6,400,000 more than they said they would take in 1931. Not only are they not restoring the 1931 cuts, but they are taking nearly £6,500,000 more, and then hon. Members have the impudence to say: "We are restoring the cuts to the unemployed." They are restoring the cuts that cost them nothing and restoring cuts to those unemployed who are the best off. This class of the unemployed, those on transitional payment, has steadily grown since 1931. In 1931 they numbered 850,000, and they are now 1,850,000, and from that class the Government are extracting £16,500,000. If hon. Members feel satisfied about that, then I say that they got their votes at the General Election under false pretences.
If the Government want to do the decent thing, if they want to go to the country, if the Prime Minister wishes to go to the country and say: "This is my vindication for what we did in 1931," let him give back that £16,500,000. He cannot do it. I am glad that the Chancellor of the Exchequer is now in his place. He said that in the Committee stage of the Unemployment Bill we have been making false statements to the effect that they could not restore the cuts in the Bill. I repeat the statement in his presence, that they cannot restore the cuts to the unemployed without abandoning the Bill, that Part II of the Unemployment Bill was made necessary by the means test, that without the means test you would not need the Bill, and that the Unemployment Insurance Bill is devised to perpetuate the 1931 unemployment cuts. The whole system of the British poor law, the whole local government system of Great Britain is being reorganised to enable the Chancellor of the Exchequer to take £17,000,000 a year from the unemployed. What is worse, when the Unemployment Insurance Bill starts operations not only will the Government save that amount but they will save much more. If we judge by what is happening in Durham and in other places where commissioners are in
existence they will save a further £20,000,000 a year out of the unemployed. So much for the assertion of hon. Members opposite that the Government are restoring the unemployment cuts.
What makes it in my view an unforgivable crime not only to the country as a whole but to the people in different parts of the country, is that in those areas where unemployment has been most stubborn, where poverty is the worst, where conditions are most appalling, where industry is declining, the cuts will still remain. I say to the Government, not only are you feeding the rich at the expense of the poor but you are feeding the rich areas at the expense of the poor areas. You are aggravating the difficulties in Lancashire, Durham, South Wales and Lanarkshire. This Budget, however satisfactory it may appear to hon. Members opposite upon first examination does not show up nearly as well when it is examined in relation to the facts.
I know that the Financial Secretary to the Treasury wishes to speak, and I will not delay the Committee longer. I have made by main points, and I think I have shown and my hon. Friends have shown that this is a class Budget. It is a piece of class prejudice. It perpetuates class distinctions, it shifts the burden of taxation from direct to indirect. It reduces the expenditure on social services all round, it has made the condition of the working classes worse. It uses the surplus which the Chancellor of the Exchequer has accumulated to make the position of the better off better off still, it leaves the poor worse off. It is a Budget which shows an absolute lack of imagination and no warm sympathy for the British people. It is a Budget of which this House and the Chancellor of the Exchequer should be ashamed, and when the country comes to understand it in its realities they will give this Government short shrift when the opportunity comes.

10.8 p.m.

The FINANCIAL SECRETARY to the TREASURY (Mr. Hore-Belisha): I can understand the indignation of the hon. Member for Ebbw Vale (Mr. A. Bevan) at being deprived of those weapons wherewith he has hitherto attacked the Government. The hon. Member for Bridgeton (Mr. Maxton), with a keener
Parliamentary and political sense, was wise enough to rise at the first opportunity yesterday and thank the Chancellor of the Exchequer candidly for the boon which he had given to the unemployed, and endeavoured, with canniness, to obtain some credit for the concession, attributing it to the arrival of the hunger marchers in London. I think the hon. Member for Ebbw Vale will have some difficulty when he finds an unemployed man drawing 17s. instead of 15s. 3d. in persuading him that he has been the victim of a robbery. The Debate began and has proceeded upon a softer, gentler and more gracious note than that which the hon. Member has so cacophonously sounded. It began with the speech of the hon. Member for Caerphilly (Mr. M. Jones), which can only have been the outcome of prolonged and painstaking statistical study, such as we have grown accustomed to expect from him. He made very few references, and I can understand his reticence, to the proposals which are nominally under discussion. Avoiding their intrinsic merits, he preferred to make a broad survey of fiscal events throughout the world, concluding with a philosophical analysis of the respective incidences of direct and indirect taxation. The hon. Member for Huddersfield (Mr. Mabane), in a speech remarkably well informed, and which I am sure the Committee found most instructive, completely demolished the arguments of the hon. Member when he recalled that the burden borne by indirect taxation had actually declined since the War.
I do not intend to refer at any length to a subject which was amply discussed last year, but in the hope that I may once and for all disabuse the hon. Member of certain fallacies which he holds on this question I should like to remind him, firstly, that direct and indirect taxpayers are not two separate classes. All direct taxpayers are indirect taxpayers. Secondly, that the mainstays of indirect taxation are alcoholic liquors from which the hon. Member has a particular aversion; these produce nearly £100,000,000 annually. When the proposal was before the House last year to reduce one of them, the duty on beer, by £16,000,000, thus reducing the proportion of indirect taxation, the hon. Member was the first to complain. Thirdly, in so far as indirect taxation is protective and keeps
out of the country a competitive article which the worker himself can make, what he loses as a consumer he gains as a producer. Fourthly, in any event the hon. Member's figures are selected on quite a wrong basis, for he has omitted to observe that where Customs revenue is concerned the higher the duty and the more successful we are in keeping imports out of the country, on his analysis the indirect taxpayer is correspondingly relieved of any burden. Finally, the argument is purely academic, and not practical, for there is not a constant fund from which direct taxation may be taken, as the declining yield in revenue despite an increase in the rate has amply proved. I come once again, and by this somewhat devious route, to the speech of the hon. Member who has just sat down. I gather from him that the Opposition are unable to congratulate the Chancellor of the Exchequer either on the financial results of last year or on the prospects for the present year. I gather further that if our fortunes had been in their keeping they would have staked out a better claim than we on the gratitude of the community for the distribution of a surplus which they have done nothing to create and which they informed us our methods could never produce. The hon. Member will perhaps recall that this is not the first occasion upon which we have had a declamatory and denunciatory speech from him. He spoke in similar terms last year when he was complaining bitterly not about a surplus, but about a deficit. What, he asked, would happen in the course not of the coming year but in the course of the next few years? We were to have deficit after deficit. We would never be able to balance the Budget in view of declining economic resources and our increasing financial difficulties and our rule was to be dissolved by bloody-mindedness and thuggism. It was difficult, he told us—I can recall the fervour of his tone—to bring home the realities of the situation to hon. Members. The realities have been brought home, and the surplus which has been realised stands at £31,000,000. I have omitted one passage from the hon. Member's speech. He said he was afraid that next year—that is the year in which we now are—we would have to repeat the device of 1931 and have another Economy Bill. If it is to be
called an Economy Bill, we are to have it, but its purpose is entirely different from that which the hon. Gentleman imagined.
I hope the House will now appreciate the hon. Gentleman's indignation. Confronted with this realised surplus, which he told us was impossible of achievement, the hon. Gentleman finds himself, like other Members of his party, under the necessity of explaining it away, and they fall back upon the unwarrantable assertion that it has been squeezed out of the unemployed. A survey of the items of the surplus is sufficient to disprove conclusively such an indictment. The surplus exists because of the betterment of trade, because of a certain windfall from Death Duties and comes from other directions, upon which my right hon. Friend dwelt yesterday at length.
If one must generalise and say that the surplus has been squeezed out of a particular class, it would be truer to say, in view of the fact that our accounts are £40,000,000 better off as a result of the Conversion than they were two years ago, that the surplus has been squeezed out of the capitalist. This surplus has of course automatically been applied to the reduction of debt. In view of the fact that our receipts were greater by £31,000,000 than our expenditure, which expenditure includes the service of the Statutory Sinking Fund and the payment to America, we were able to reduce our borrowings by Treasury Bills to this amount, which should please my hon. Friend the Member for Farnham (Sir A. M. Samuel), who made a most valuable contribution upon this general subject. I can understand the temptation of some hon. Members to resuscitate this sum of money, to re-borrow it and apply it to some other purpose, to the Unemployment Fund for instance, as has been suggested by two or three right hon. and hon. Gentlemen.
The Unemployment Fund already stands to benefit more or at a greater rate by the betterment of trade than the Exchequer. For every 100,000 by which the live register is reduced the Unemployment Fund becomes £3,000,000 better off. In any event the proposal is tantamount to recommending that when there if a deficit you must increase your debt—as indeed of course you must—but when there is a surplus you must not reduce your debt.
Such practice is no more tenable in public than in private economy. The advantage of following the normal practice is neatly demonstrated by the recollection that my right hon. Friend has been able to pay off this year almost precisely the same sum that he borrowed last year, and that should commend him, if not to the hon. Member for Ebbw Vale, at any rate to the hon. Member for Caerphilly, who asked was it appropriate to leave this burden of the debt to posterity.
The hon. Gentleman complained that we had added £165,000,000 to the dead weight debt in the course of the year. The true figure is £178.5 millions, but the hon. Gentleman omitted to recollect that we had borrowed during the year £200,000,000 for the Exchange Equalisation Fund against which we hold assets and also that we had applied the surplus to the redemption of debt. I am not making an exact calculation; there have been conversion schemes during the year some of them at an issue price lower than their par value, but the hon. Gentleman will see at once how he fell into error upon that point. I was sorry to find the right hon. Gentleman the Member for Darwen (Sir H. Samuel) identifying himself with this financial heresy for I know what store he sets on consistency. He now enjoins us to increase the dead weight debt, or rather not to reduce it. I prefer to associate myself with that more considered opinion of his which finds expression in his Appeal to the Nation and which lays down that the credit of a State demands that budgets shall be balanced and public debt repaid.
So much for the realised surplus. Such is the confidence now reposed in our financial policy that it is actually suggested that my right hon. Friend is underestimating the benefits that are to accrue from this policy. It is not long since a contrary view was taken. I can recall that from some quarters last year my right hon. Friend was told that the only way in which he could expect to fortify the revenue was by remitting taxation in advance and hoping for the best. From other quarters we have been told—and if my right hon. Friend the Member for Darwen were here he would recognise the phrase—that the record of the Government would presumably continue as one of unredeemed failure. Among the Opposition, of course, even more hopeless
prognostications about the future were heard. I need hardly pause to dwell upon them, but in so far as the present optimism comes from this side of the Committee it is an encouraging reiteration, much appreciated, of the unswerving confidence shown in my right hon. Friend and the Government. In so far as it has been expressed from the benches opposite, in so far as they say that my right hon. Friend is underestimating his surplus, we welcome the belated recognition of our virtues which I thought were destined to blush unseen. I hope, however, the Committee as a whole will agree that my right hon. Friend has been wise in trying to base his concessions upon as sound and reliable a foundation as possible. Should he overload the foundation and should the foundation crack under it as the result of influences which we cannot now foresee the despair would be far greater than the relief that is now felt.
In any event, the conclusions which my right hon. Friend has reached upon each one of his individual estimates, and the reasons which he gave to the Committee for those conclusions, would have to be far more adequately disproved before the case made out by my right hon. Friend the Member for Ripon (Major Hills), my hon. Friend the Member for Huddersfield (Mr. Mabane), and others could be allowed. My right hon. Friend the Member for Ripon, with much Treasury experience, examined the estimates with very great skill, and so did my hon. Friend the Member for Huddersfield, but they said nothing which can disprove in advance the accuracy of my right hon. Friend's estimates for which he gave full and ample reasons. None of us are gifted with precognition in these matters, and I hope sincerely that the end of the year may show that my right hon. Friend the Member for Ripon is also among the prophets. But when he says that the Income Tax would be greater because arrears had accumulated last year which will be received this year, he is entirely misguided, because my right hon. Friend took pains to inform the Committee in his Budget speech yesterday that the taxpayers had been paying up with great promptitude. That, I expect, disposes of the ground upon which my right hon. Friend bases his criticism of that estimate. As regards stamps, which he thinks, in view of in-
creasing industrial activity, should produce a greater return, he will not have forgotten that the Companies Capital Duty was reduced by half last year, and that my right hon. Friend's estimate to receive £25,000,000 from Stamp Duties is only £700,000 less than in 1929, which was a comparatively booming year.
Perhaps the most penetrating observation came from my hon. Friend the Member for Huddersfield, when he asked how it was that whereas the actual cost of interest and management of the national debt alone in 1933, excluding the American payments, was only £213,000,000, in 1934 it was estimated to be £224,000,000. He will recall the explanation which my right hon. Friend gave yesterday about the low rate of interest. It is true the average rate of bills for the year was, as my right hon. Friend said, 12s. 6d. per cent., but for the two weeks of this year it has been 18s. per cent. There are, however, two further considerations which I can lay before him. Another item is that last year we had to meet only one-half of the interest on the 2½ per cent. Conversion Loan, whereas this year we pay a full year's interest at a cost of £2,500,000. Further, my hon. Friend will appreciate that the encashments of savings certificates are beyond our control. The average amount of interest we had to pay out on encashments in the six years between 1927 and 1932 was £18,500,000, whereas the interest on the actual encashments in 1933 was at the exceptionally low figure of £11,000,000. My hon. Friend will therefore see that there was some substance in the estimate which my right hon. Friend laid before the Committee.
No one would be better pleased if things turn out even better than are expected, but my right hon. Friend cannot build on a foundation which he does not think will be secure. The extent to which he has placed a hopeful construction on the future can be gauged by three figures. The total revenue in 1933 was £724,500,000, which was £25,790,000 in excess of the Estimate. My right hon. Friend is budgeting on the basis of existing taxation to receive the whole of that excess and £2,653,000 in addition. He is estimating for increased receipts under all the principal items and the figures will show my right hon. and gallant Friend
the Member for Ripon how much more generously my right hon. Friend has estimated this year than last. By means of his estimates my right hon. Friend reaches a prospective surplus of £29,000,000 and the only practical question is how he disposes of it. He proceeds upon two principles. The first is that the sacrifices made in 1931, being in their essence temporary and destined to meet an emergency, have first claim on any surplus. The second is that the alleviation should be distributed as equally as possible among all the individuals who made the sacrifices in roughly the same proportion as the sacrifices which they made.
In that he followed these two principles, the hon. Gentleman the Member for Caerphilly accused him of breach of faith. He said that the Prime Minister in the early part of this year had actually stated that the cuts would be restored even at the expense of ignoring the other section which made sacrifices, namely, the direct taxpayer. He was repeatedly challenged by my right hon. Friend to substantiate so serious a charge. He completely failed to do so. Since then my hon. Friend the Member for Attercliffe (Mr. Pike) has been good enough to look up the speech to which the hon. Gentleman referred and I am now in a position to read the exact words. I am sure that the hon. Gentleman with his usual fairness will appreciate that his recollection was at fault. I place it no higher than that because I am sure the hon. Gentleman would never have made such a statement unless he had conceived it to be well based. What the Prime Minister said in the speech referred to was:
Make no mistake about it. We are not going to favour one class of the community against another. It was an equitable distribution and as we were all partners in bearing so shall we be partners in sharing. The partnership in distress shall be continued in restoration.
We are not now considering whether the sacrifices originally made were equal and every illustration used in the course of this Debate to demonstrate that they were unevenly distributed is irrelevant. That aspect of the matter was fully discussed in 1931, and was finally decided when the electorate accepted the position. Nor are we considering that abstract question raised by the hon. Mem-
ber for Ebbw Vale (Mr. A. Bevan) as to how the money shall be spent and whether the Income Tax payers spend their money more usefully than civil servants, whether, for instance, to use his own words, they buy butter and eggs or otherwise. We are not considering that matter.

Mr. A. BEVAN: Except that the Chancellor of the Exchequer himself said it would give more spending power.

Mr. HORE-BELISHA: Certainly, the spending of money is bound to have an effect, but the money is not being restored in order that one man may buy eggs and another man may buy his wife silk stockings. The purpose is to restore a sacrifice which was made upon the principles which I have enunciated. What we are now considering are the steps taken within the means at our disposal to restore to the individuals concerned what they gave as their contribution towards the emergency. By general and unquestioned consent the unemployed come first and are in a special category and are to have the whole of their cuts restored.

Mr. BEVAN: No.

Mr. HORE-BELISHA: At the time of the emergency the Exchequer spared the unemployment fund any further borrowings when their statutory powers were exhausted and accepted liability for both forms of benefit—insurance in so far as the resources of the fund were inadequate and transitional benefit completely. Under the first head the State has contributed £6,000,000. These measures, coupled with the improvement in employment, have now placed the fund upon a sound basis, and it is estimated that if unemployment were to remain at its present level it would have £10,000,000 in its coffers at the end of a year. Surely it is inequitable to ask that the State, having come to the assistance of this fund in bad times to an extent which was measured even more greatly by the figures given by the right hon. Member for Darwen should also be asked to come to its assistance when times are good.
That special arrangement with regard to the unemployed leaves us to deal with those who suffered reductions of pay and those who suffered reductions of net income. Those who suffered reductions of pay—Ministers, Members of Parliament, judges, civil servants, dockyards-
men, sailors, soldiers, airmen, teachers, police, doctors and chemists—are all to get back half of what they gave. When we come to those who suffered reductions in net income their contribution, as the hon. Member for Caerphilly rightly said, was divided into two parts, the first part a modification of allowances, the second part an increase in the rate of tax. In deciding which half to restore my right hon. Friend had to have regard to which part he considered would have the more widespread effect. I have no doubt that if the choice had been made in favour of the allowances many more people would have suggested that the choice which we have in fact made should have been made. There is room for a genuine difference of opinion and the very fact that there are alternatives implies that everyone cannot be satisfied.
It has to be borne in mind by hon. Members of the Opposition, who perhaps do not appreciate it, that the existing allowances free completely from Income Tax 4,500,000 people out of the 8,000,000 people who have incomes above the exemption limit. On the whole it was decided by my right hon. Friend to allocate the money in a way in which every taxpayer could share alike. The burden of the Income Tax is primarily judged by the height of the standard rate, and the reduction of the rate has a definite connotation and influence in everyone's mind. The method that has been employed will bring relief not to individuals only, but to industry. It may have escaped the attention of hon. Gentlemen that by lowering the charge of the tax on reserves my right hon. Friend has enabled cooperative societies as well as ordinary companies to release money for the expansion of business. My right hon. Friend acted completely in accordance with his consistent policy of lightening the burden upon industry, and another illustration of that is afforded by the reduction of the horse-power duty upon vehicles which will bring benefit not only to trade but to hundreds of thousands of people. There are 1,800,000 motor cars and motor cycles, and it can be conjectured what the saving of 25 per cent. upon the licences will mean in January next.
Some effort has been made during the Debate to create prejudice by contrasting
the allocation of the surplus as between those affected by pay cuts on the one hand and the Income Taxpayers on the other. It is true that in a full year the cost of restoring half the cuts is £5,500,000—I am leaving out of consideration the unemployed who are treated separately—whereas the cost of 6d. off the Income Tax in a full year is £24,000,000; but there are 1,000,000 people affected by the cuts and 3,500,000 people affected by the Income Tax provision. The full value of the contributions made by those who suffered cuts was £11,000,000 and that made by the direct taxpayers was £57,500,000 annually. Therefore, the expense of restoring half the larger contribution made by the greater number of people is more than the expense of restoring half the smaller contribution made by a smaller number of people. I hope that no further play will be made by contrasting those two figures. If the question of the date of the restoration is of any relevance, it will in point of fact be found, if the whole period be surveyed,' that the Income Taxpayers will have suffered cuts over a longer period.
This Budget cannot give rise to genuine controversy. I feel sure that the indignation which was expressed yesterday, and of which we have heard no repetition until the last speech to-night, was an indication of a general disappointment at the thought that the National Government had kept its word, and begun the process of restitution of sacrifices, because that process was made possible by sound, unimaginative, pedestrian, antiquated and anachronistic finance. When hon. Gentlemen opposite think the matter over, they will be compelled to admit that, after all, here is a Budget which makes no man's lot harder, which increases no one's anxiety, but which, on the other hand, relieves something of everybody's burden with a prospect if the same policy be pursued and the same good fortune be forthcoming of more in the future. Each one of my right hon. Friend's Budgets has been better than the last. Perhaps hon. Gentlemen opposite are so dejected because we are providing at last a demonstration of the truth of the doctrine which they profess to believe in but fail to practise—the inevitability of gradualness.

10.48 p.m.

Mr. CROOM-JOHNSON: One of the most evanescent things in the House of Commons is the effect of the spoken word, and, before we separate this evening, I want to say just a few words about the speech which was to me the most attractive one—the speech of the hon. Member for East Fulham (Mr. Wilmot). Many of us have a great deal of sympathy with the point of view that he put forward in reference to the allowances which affect the small Income Tax payer. That feeling is not in the very least confined to those who sit around the hon. Member for East Fulham. But what we have to do in this connection is to make again one of the distasteful decisions which those of us who sat in the House at the time of the Emergency Budget of 1931 had to make. One had to decide which of a number of different things were the things which at the moment were best calculated to produce the best national results. I followed with great interest the figures and examples which the hon. Gentleman gave. I have no doubt that in Income Tax matters in connection with this Budget, as, indeed, in other matters relating to taxation, all of us can easily find a number of discrepancies, of uncertainties, and even of unfairness; but, looking at the hon. Member's figures a little more closely, I was not altogether surprised to hear him say that he was not going to deal with the percentages, because, when one looked at his figures, one found that the percentages of income paid, in many of the examples that he took, were sufficiently serious in their differences. I made the hastiest calculations and took down as quickly as I could the illustrations, which I have no doubt he had prepared with great care. I did, however, observe that, dealing with a particular family with an income of £500, the total amount of the tax worked out at a figure, before the reduction in the rate of tax, of about 3 per cent. On the other hand, if the same family were taken with an income of about £2,000 a year, the percentage of tax worked out—again, I am giving the roughest of calculations, made, as the hon. Member will appreciate, in great haste—at something like 17 per cent.
There is, however, another point of view about people who are getting the benefit of what I cannot help feeling is the right conclusion to which the Chan-
cellor of the Exchequer has come. People are so often in the habit of talking about Income Tax as if everybody who paid Income Tax paid it on a fairly substantial income. A good deal of the income which is attributed to what is roughly and inaccurately called the rentier class is tax which is deducted at the source on small investments belonging to small people, who very often are kept out of possession for some time before they can send through the necessary repayment form, and who in many cases do not get it through at all.

Mr. WILMOT: I am sure that the hon. and learned Gentleman will pardon my interruption. He will appreciate that those small investors would be the first to welcome the restoration of the allowances, because they would reap a far greater benefit from that than from a reduction in the standard rate. The hon. and learned Member will, I am sure, forgive me, and perhaps welcome the fact, if I point it out to him, that the percentage to which I referred was not the percentage of tax paid, but the percentage of tax restored. I am sure that he will not argue, as between incomes of £500 and £2,000, that there should be a flat rate of percentage tax.

Mr. CROOM-JOHNSON: I am afraid that the hon. Gentleman has not in the least understood the course which I was pursuing. Of course, no one is suggesting that there should be a flat rate of percentage. When you are dealing with the question of how much is coming off, you cannot help having regard to the fact that the matter is very serious indeed. When you get percentages of 15, 17 or 20 per cent. of a man's income, you very often find, when the income goes up, that the actual amount which he has to spend on himself does not seem to increase in the least. However that may be, I was dealing with the total amount of tax paid by individuals before the recent proposals took effect; that is to say, on the old allowances. At the same time, although it may be perfectly true that the change in the form of the allowances might be suitable to some small people—

Mr. WILMOT: All.

Mr. GROOM-JOHNSON: —it is at the same time of great value to a number of
people with incomes who do not happen to have dependants who come within the Income Tax Acts, but who have charges upon their income in respect of people to whom they have committed themselves for small allowances, and find that the deduction of tax at the source is a great burden. One has at the same time to balance one other thing. It is no good taking a short view about these matters. One takes short views, and very often finds oneself brought up against unexpected obstacles. The right view to take here, as it seems to us, is that we should do that which is in the long run best calculated to be of assistance to the community as a whole. I should have liked, if possible, to make some alteration and to scale down the allowances in 1931, but those of us who have gone into the matter have to weigh which of two things is preferable, and, having seen what the effect of a reduction of 6d. will be, not only to industry but to large numbers of Income Tax payers who have been hit not only with regard to declining income, with regard to Income Tax and with regard to difficulties of every sort and kind in the bad years which we now hope are behind us, we have come to the conclusion that the right hon. Gentleman's proposal is one that merits our complete support.
There are one or two other things which I hope at some time, not perhaps in this Budget, it may be possible to have considered for the purpose of fostering trade and industry. I do no more than refer to the reduction in the postage rate. So far as reduction in motor car taxation is concerned, some of us hope that that is to be the prelude to an examination into the whole question of motor car taxation, to the question of the continued existence of the Road Fund, which, although it has no doubt produced good results in the years that have passed, now perhaps merits reconsideration and re-examination in order to see whether the money derived from this tax may not be put to a better use. There is only one other topic that I desire to raise a question about in the hope that it may be dealt with before the discussions on the Budget are concluded. I observed in the list of figures dealing with the debt a figure of, I think, £122,000,000 which is in the hands of different Government Departments, which have been received by
them under various Acts of Parliament—Victory Bonds is one which leaps to the mind—and which have been received by them chiefly, I think, in the payment of Death Duties. They are received at their par value under arrangements which were made when the loan was floated. They are still being retained. I have no doubt that the result of it is that the interest on those Victory Bonds is being paid into the funds of the Government Departments, but there seems to be some uncertainty in the public mind—I have no doubt that from the Sinking Fund point of view the procedure is perfectly right—as to whether it would not be possible to cancel those bonds, and, if they were cancelled, whether the effect would be that the interest paid on them would be saved to the Exchequer each year, and, as I have been invited elsewhere to explain why that is not done, and what the effect of doing it would be, I put the question to my right hon. Friend in the hope that it may be dealt with before the discussions on the Budget are concluded. The Budget offers a hope of better things and better tidings to those of as who have gone through a number of dark days together, and I only hope that the gloomy and Cassandra-Mice utterances which have come from the hon. Member for Ebbw Vale will not be repeated in the course of these discussions.

Motion made, and Question, "That the Chairman do report Progress and ask leave to sit again," put, and agreed to.—[Captain Margesson.]

Committee report Progress; to sit again To-morrow.

Orders of the Day — FINANCE [POWER TO BORROW FOR CERTAIN FINANCIAL PURPOSES].

Considered in Committee, under Standing Order No. 69.

[SIR DENNIS HERBERT in the Chair.]

Resolved,
That the whole or any part of the sums required in the current financial year for the purposes mentioned in paragraph (a) or paragraph (b) of sub-section (4) of section twenty-three of the Finance Act, 1928, may be provided out of money to be borrowed for the purpose under section one of the War Loan Act, 1919, instead of out of the permanent annual charge for the National Debt."—(King's Recommendation signified.)—[Mr. Chamberlain.]

Resolution to be reported To-morrow.

Orders of the Day — FINANCE [SINKING FUND OF THREE PER CENT. FUNDING LOAN, 1959–69].

Considered in Committee, under Standing Order No. 69.

[SIR DENNIS HERBERT in the chair.]

Resolved,
That any sums required to fulfil the undertaking contained in the prospectus of the Three per cent. Funding Loan, 1959–69, to set aside certain sums for sinking fund purposes shall be charged on the Consolidated Fund, and that the whole or any part of the sums so required in the current financial year may be provided out of moneys to be borrowed for the purpose under section one of the War Loan Act, 1919."—(King's Recommendation signified.)—[Mr. Chamberlain.]

Resolution to be reported To-morrow.

The remaining Orders were read, and postponed.

Orders of the Day — ADJOURNMENT.

Resolved, "That this House do now adjourn."—[Captain Margesson.]

Adjourned accordingly at Five Minutes after Eleven o'Clock.